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Investing Specialists

3 Energy Stocks Our Top Managers May Have Overlooked

Our Ultimate Stock-Pickers have stepped up their activity in the energy sector.

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By Drew Woodbury | Associate Stock Analyst

The last year and a half has been a tumultuous one not just for the financial sector but for the energy sector, as well. Just over a year ago, crude oil prices were topping out above $140 a barrel before starting a downward spiral that left prices bottoming out around $35 per barrel earlier this year. The precipitous decline in the price of crude, coupled with restricted access to the credit markets, caused many oil-related stocks to take a beating. The  Energy Select Sector SPDR (XLE), an exchange-traded fund that tracks an index of energy-related stocks, fell more than 50% from its highs in the summer of 2008 to its lows in the early spring of 2009.

As the outlook for the economy began to improve, the price of crude oil started to rise (even doubling since it bottomed earlier this year), lifting the price of many stocks in the energy sector. Several of our managers viewed this as a sign that it was all right to step back in, loading up with high-conviction purchases of a number of energy companies. Surprisingly, though, their weighting in the sector continues to be rather light, at around 9% of the total holdings of our 26 managers. The top energy holding continues to be  ConocoPhillips (COP), which several of our managers, including Warren Buffett's  Berkshire Hathaway (BRK.A) (BRK.B), were piling into during the third and fourth quarter of last year.

The Morningstar Ultimate Stock-Pickers Team does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.