S&P/ASX 200 Index (ASX: XJO) energy shares have been some of the top performers over the past year.
Fuelled by soaring energy prices, the S&P/ASX 200 Energy Index (ASX: XEJ) is up a remarkable 40% since this time last year. That compares to about a 9% 12-month loss posted by the benchmark ASX 200 index.
Leading ASX 200 energy share Woodside Energy Group Ltd (ASX: WDS) has certainly pleased investors, with its shares up about 70% over the full year. And you're not likely to hear Santos Ltd (ASX: STO) shareholders complaining about the company's 25% 12-month gains either.
Atop those share price gains, both ASX 200 energy shares pay some healthy dividends. Last week, Woodside declared its largest half-year dividend since 2014.
Beyond the oil and gas companies, record coal prices have seen Whitehaven Coal Ltd (ASX: WHC) shares leap an eye-popping 198% since this time last year. And this is a $7.5 billion company we're talking about here.
So, with these gains already in the bag, are ASX 200 energy shares a good investment right now?
ASX 200 energy shares operating in 'most favourable sector'
For some expert insight into that answer, we defer to the global equity strategists at JPMorgan.
According to the strategists (courtesy of the Australian Financial Review):
With no resolution to the current energy crisis in sight, energy sector remains in a particularly sweet spot with very attractive valuations, strong fundamentals and significant improvement in quality.
Currently energy is trading at an extreme about 10x [price-to-earnings] PE discount vs market. More so, across all sectors Energy is seeing by far the largest improvement in its ranking across all key styles / factors simultaneously.
This makes it the most favourable sector based on various Quant models and should result in incremental positive equity flows from various types of products (e.g. Equity Quant, Smart Beta, etc.), that we estimate currently to be about $US20 billion per month as these products get rebalanced.
JPMorgan forecasts a solid growth outlook ahead for the global energy sector. This should come as encouraging news for existing or pending investors in ASX 200 energy shares.
According to the broker:
The sector should deliver strong relative growth (with upside to current consensus estimates) and rising capital return … at very cheap valuation … while its balance sheet continues to strengthen.
The analysts assumed crude prices ranging from US$60 per barrel to US$70 per barrel.
