According to ValuEngine, one of the better analytics firms, oils and energy are the most undervalued sector right now. VE estimates that this sector is undervalued by about 32%.
Meanwhile, crude oil is in an uptrend. OPEC is looking at supply cuts, geopolitical tensions with Iran are heating up, and US crude oil inventory just posted another large supply draw. In other words, all the catalysts for this sector are pointing upward.
Although crude prices are up today, oil and gas exploration stocks are down. That's partly because of pessimism about a Fed rate cut, and partly because of resistance from down-trending moving averages. But once the GUSH fund pushes above its 50-day MA, it could pop a lot higher as the sector corrects to reflect the recent movement in crude prices.
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Another oil inventory draw is expected next week, so in the short term this play looks good. However, this is not a long-term play. OPEC and the EIA both just forecast a supply glut in 2020 that will drive down oil prices.
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Despite rising crude oil prices, GUSH fell hard this morning on news of a big oil spill in California. CNBC is also reporting on new international maritime emissions standards that will prevent ships from burning low-grade fuels. It's hard to predict how this will affect the oil industry. It will reduce demand for low-grade fuels, but increase demand for high-grade fuels. Perhaps it's a wash in the end, but it may create a disposal problem for surplus low-grade oil.