Long-Term Bets

About 10 percent of the demand for energy shares is coming from retail investors looking to flip stock through online brokers, according to the bankers and investors. That’s dwarfed by about 50 percent that are making a longer term bet on the only asset class in the U.S. offering bargains.

“Interest rates are so low, a lot of people are skeptical of froth in the broader market, and energy is one area that has seen a major correction,” said Tim Beranek, an energy portfolio manager who helps oversee about $11 billion for Denver-based Cambiar Investors LLC. “Everyone is trying to find a bottom in one of the only places where that’s possible.”

So far this year, energy is paying off. Shares of oil and natural gas producers, which fell almost 50 percent along with crude prices last year, have significantly outperformed the broader market in 2015, rising about 14 percent.

Nice Returns

That’s almost 10 times the return of the Standard & Poor’s 500 Index. New shares issued this year by North American producers have risen an average of 16 percent from their offering prices, according to data compiled by Bloomberg.

The amount of money pouring into the sector is among factors that has bolstered the valuations of producers. On average, the larger companies are trading as if oil was selling for about $74 a barrel rather than $50, according to an April 16 report by RBC Capital Markets.

Even so, Blackstone Group is among a number of private equity firms that set out to pour money into energy, but has stayed on the sidelines as public markets filled the void so far this year.

Oil companies have been “able to go out and raise a lot of debt and, in some cases, equity, publicly at values that we wouldn’t touch,” President Tony James said in an April 16 conference call with reporters. “There’s still a lot of optimism oil prices are going to bounce back, and sellers are sort of biding their time in the hopes that they don’t have to face the music.”