Wells Fargo favors energy stocks in the US market; integrated oil and midstream energy stocks are "favorites"

According to a report from the Wells Fargo Investment Institute, the energy sector of US equities is the most favored, especially integrated oil and midstream energy stocks.

The global equity research team at the Wells Fargo Investment Institute released a list of the S&P 500 sectors that analysts most favor.

Analysts expect the long-term fundamentals of the energy sector to remain solid as macroeconomic volatility persists, they said.

The report said: "Energy companies continue to prioritize capital discipline and provide competitive shareholder returns through dividends and stock repurchases. We believe the recent industry consolidation has improved capital efficiency and valuations are reasonable, and balance sheets have improved significantly over the past few years."Analysts favor integrated oil companies for their size, financial flexibility, and diversified exposure along the energy value chain. High-quality midstream companies are also favored.

On the other hand, analysts are not bullish on refiners, "as we expect refining margins to remain highly volatile due to global capacity additions and global product demand volatility."