After years of underperformance, energy finally is starting to show sector leadership. And of course, just when it does, the president shoots out a tweet last week about OPEC and the current price of oil. This despite the fact that he has cheered U.S. energy independence and our growth in production status as it creates tens of thousands of jobs here at home. Despite the saber-rattling, there’s every indication that higher prices could be here to stay.

In a new research report, Jefferies feels that the president’s one-off comment aside, the fundamentals for the sector look outstanding and the stocks remain some of the best values as we approach the busy summer driving season. The report noted this:

Just when Energy was finally playing a game of catch up with oil, Trump tweeted concerns about OPEC and the price of oil. We hope that this goes the way of trade tariffs: they become less of a concern once he understands what he actually said. We are Overweight Energy as it is cheap; a weaker dollar, stronger GDP, and improving sentiment provides tailwind.

Here are the five reasons Jefferies loves the energy sector now:

1) Since the June 2017 low, oil is up 48%, but Energy is only up 13%, so we think the group plays a game of catch up.

2) When the US economy is running above average, Energy returns an average 27% versus the Russell 2000 at 15%.

3) Sentiment is shifting in favor of group, as inflows and interest starting to pick up.

4) Managers in small and smid, especially value, may need to pay a bit more attention to this sector as its weight rises after rebalancing. We also estimate that passive funds will need to buy over $1 billion of Energy shares.

5) If investors want cheap growth, this is the place to look with highest estimated sales growth of any sector and ranks the cheapest on our valuation model.

Three energy stocks are on the Jefferies Franchise list of high-conviction stock picks. They are of course rated Buy and the best ideas for investors to consider now.

Chevron

This integrated giant is a safer way for investors looking to stay or get long the energy sector, and it has a big Permian Basin exposure. Chevron Corp. (NYSE: CVX) is a U.S.-based integrated oil and gas company with worldwide operations in exploration and production, refining and marketing, transportation and petrochemicals.

The company sports a sizable dividend and has a solid place in the sector when it comes to natural gas and liquefied natural gas (LNG). Some on Wall Street estimate that the company will have a compound annual growth rate of over 5% for the next five years.

The company’s production from the Permian Basin continues to exceed trajectory, and it provided investors with a reasonable bullish update at the March 6 investors day. With Permian production and asset disposals targets reset, the company can raise the dividend 20% and buyback 15% of shares. Many analysts view the strategy update as appropriately conservative for one of the more oil-levered majors. The Chevron strategy through 2020 is focused on discipline enabled by step change in capital efficiency driven by doubling Permian production.

Shareholders receive a 3.63% dividend. The Jefferies price target for the stock is $149, and the Wall Street consensus target is $135.88. The shares closed Monday at $123.58.

Diamondback Energy

This is a top Permian Basin play for more aggressive accounts and is a top pick across Wall Street. Diamondback Energy Inc. (NASDAQ: FANG) is an independent oil and natural gas company headquartered in Midland, Texas, and focused on the acquisition, development, exploration and exploitation of unconventional, onshore oil and natural gas reserves in the Permian Basin in West Texas.

Diamondback’s activities are primarily focused on the horizontal exploitation of multiple intervals within the Wolfcamp, Spraberry, Clearfork and Cline formations.

Wall Street analysts have noted in the past the company’s top-tier asset base, solid accretive additions and financial discipline, which they think allows for not only continued solid cash flow, but could put the company in play as a takeover target. Diamondback continues to drill some of the most economical wells in the United States as efficiencies improve, costs decrease and activity remains in the better regions.

Jefferies has a $162 price target, and the consensus target is $155.82. Shares closed Monday at $128.24.

ONEOK

The volatile price of natural gas over the past year has weighed some on this top energy stock. ONEOK Inc. (NYSE: OKE) primarily engages in natural gas transportation, storage and natural gas and NGLs gathering, processing and fractionation in the Bakken, Mid-Continent and Permian. The company recently closed the roll-up of its underlying master limited partnership, ONEOK Partners.

The company has a strong presence in the Oklahoma SCOOP/STACK (NGL gathering/takeaway system, G&P), the Williston Basin (G&P, NGL takeaway) and the Permian Basin (NGL gathering, NGL takeaway, natural gas takeaway), which RBC feels provides high-return growth opportunities.

Jefferies also is positive on the company’s primarily fee-based earnings, which account for 90% of the total earnings.

Investors receive a 5.3% dividend. The $67 Jefferies price objective compares with the consensus target of $63.88. Shares closed most recently at $59.96.

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It is important to remember that energy stocks are still playing catch-up to the actual price of oil. While the oil price could fluctuate some, it’s a good bet it stays over the $60 level. That is a money-maker for most companies in the sector.

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