At the start of 2021, Dubravko Lakos-Bujas was one of the rare bulls on energy stocks. After a surge of almost 50% for the shares, the JPMorgan Chase & Co. strategist says the rally has further to go.

Oil and gas producers are among the best performers in the S&P 500 this year, with companies such as Devon Energy Corp. and Marathon Oil Corp. more than doubling.

Still, bearish bets on energy shares have climbed, with investors remaining leery of owning them. The aversion contrasts with the industry’s improving outlook -- a setup that will allow valuations to expand and catch up with fundamentals in a process known as re-rating, according to Lakos-Bujas and his team.

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