Energy stocks outperformed the broader market in the first quarter of 2024, and energy was the best performing sector in the S&P 500 in March. Tracey Ryniec, Value Stock Strategist at Zacks, joined Benzinga's “PreMarket Prep“ Monday and discussed what the sector's recent outperformance could mean moving forward.

What Happened: Ryniec is anticipating a rotation away from mega-cap tech names and into value-oriented stocks, including energy, as investors search for a better return on investment. As a result, the Zacks strategist sees energy names continuing to climb into the summer. 

"We're still in the early innings of this energy trade," Ryniec said on the show. 

Ryniec believes that the price of West Texas Intermediate (WTI) crude oil has entered its "golden area" between $80 and $90 per barrel and looks to be holding above the $80 per barrel mark. Front-month WTI crude futures were last up about 1.92% at $85.31, according to Benzinga Pro.

The value strategist pointed to this price zone as the ideal range, allowing oil companies to enjoy a "ton of free cash flow” without attracting regulatory attention that often comes when oil prices are nearing $100 per barrel. 

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Why It Matters: Ryniec highlighted Diamondback Energy, Inc ( FANG ). as one name to keep an eye on in the energy sector. She noted that the stock is relatively inexpensive at around 11 times earnings and is currently trading at all-time highs. 

"I still see quite a bit of a run that will still be coming not just this year, but in the next several years," she said, referencing the oil and natural gas company.

Investors looking for broad exposure to the energy sector can look to the SPDR Energy Select Sector Fund ETF . The XLE's top three largest holdings are Exxon Mobil Corporation ( XOM ) , Chevron Corporation ( CVX ) and ConocoPhillips ( COP ) . 

The XLE gained more than 13% in the first quarter of 2024 and could continue to move higher on the back of increased demand for oil and gas, supply chain disruptions and geo-political uncertainty impacting the sector.

"Energy is looking good here into the summer," Ryniec concluded. 

FANG, XLE Price Action: Diamondback Energy ( FANG ) shares closed Tuesday up 0.46% at $200.37. The XLE closed the day up 1.41% at $96.45, according to Benzinga Pro.

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