Chris Verrone on Energy

Earlier this week, Chris Verrone, Head of Technical and Macro Research at Strategas, appeared on CNBC's 'Fast Money' to make a contrarian call on Energy.

One important factor that Chris notes is the recent strength we have seen in Crude Oil, the underlying basis to the Energy sector as a whole. The chart looks great, as it is holding above $55/barrel and looks to be moving higher.So, if we want to get involved in this space, how should we play it? Chris thinks that Chevron (CVX) is the one of the more optimal ways to gain exposure. Considering the relative weakness of Energy in general to the broad market, he expects any flows that come in to go towards the more defensive names like Chevron or Exxon Mobil (XOM). He does not believe we should be looking at the laggards of the sector, which have been the Oil Services companies. This is simply an opportunity to "dip your toe into what has been a very out-of-consensus call." On top of this, while the global Integrated companies like Royal Dutch Shell (RDS) were the leaders in 2018, he believes that there is a reversal in leadership underway. Chris does note that MLPs have also looked good, namely Kinder Morgan (KMI) and Williams Comapnies (WMB). As Chris mentioned, the relative strength of this sector has been very weak, so any "nibbling" here should probably be done among the larger, safer players. It is not yet time to go looking for big "home run" plays yet.