According to Bank of America, the bull market in energy stocks still has room to work, and there are cheap exchange-traded funds in the market to help investors follow suit. Energy underperformed the broader market in January, with the Energy Options Sector SPDR Fund (XLE) returning just 2.8%. February got off to an even worse start, with the fund down nearly 2% on Wednesday. The dismal month follows a hugely successful year for energy stocks in 2022. The troubles can be attributed to the sharp decline in energy prices since last summer’s peak and to widespread reversals. market leadership position in recent weeks. However, Jared Woodard, Bank of America ETF and investment strategist, said in a note to clients on Tuesday that investors shouldn’t be leaving the energy sector just yet and in fact could. has yet to reach the sector after a number of cyclical funds actually saw investors withdraw. withdrawal last year. “Despite stellar returns in 2022 (+65%), energy ETFs still see -1.6 billion USD outflows. We have a favorable view based on on valuation, light positioning as well as strong commodity and equity fundamentals,” the note said. According to Woodard, investors don’t have to be too weird to take advantage of this setup. Bank of America’s top picks for energy ETFs include the broad SPDR fund, the Vanguard Energy ETF (VDE), and the Invesco S&P 500 Equal Weight Energy ETF (RYE). Woodard described these funds as “low-cost options that offer risk-adjusted high returns, above-average price momentum, and above-average exposure for top stocks.” of BofA and industry options.” Invesco’s equal-weighted fund is more expensive than SPDR and Vanguard options, although it offers more exposure to smaller stocks. Chevron and Exxon Mobil combined account for about 40% of the reach of those limit-weighted funds. Woodard also initiated coverage for the FirstTrust Energy AlphaDEX Fund (FXN), an aggressive energy strategy built on a quantitative model. Woodard gave the fund the equivalent of a holding rating, in part due to its 0.64% expense ratio and exposure to certain stocks, but the fund scores best in the Bank’s insurance group. of America in the Sortino Ratio, which is a risk-adjusted measure. return. — Michael Bloom of CNBC contributed to this report.