Amidst the frenzy of technology stocks, cyclical stocks are also worth paying attention to.

Commodity stocks such as oil and copper have become very cheap. If the economy is approaching the bottom, there should be a quick return.

Valuation decline

For example, the energy industry ETF-SPDR (XLE) has fallen by about 16% from its multi-year high at the end of 2022, with Chevron and Exxon Mobil included.

The S&P Metals and Mining ETF-SPDR (XME) has fallen by about 30% from its multi-year high at the beginning of 2022. Freeport-McMoRan and Nucor are included.

As stock prices fall, commodity prices are also falling. US WTI crude oil has fallen by more than 40% from last year's high, and international copper prices have fallen by more than 20% from their peak last year.

Data from FactSet shows that the total forward P/E ratio of XLE has dropped from around 13 times in 2022 to slightly below 10 times, and the P/E ratio of XME has dropped from around 11 times a few months ago to about 8.5 times, both slightly higher than the lowest level in the past five years.

If the economy recovers

Keith Lerner, co-chief investment officer at Truist, said: "We are approaching the end of the global economic slowdown. When you think the recovery is coming, you will want to buy these stocks." "Especially if you want to see the profit trend really start to improve."

Currently, oil analysts expect sales and profits to stabilize next year.

Analysts expect XLE's earnings per share this year to be $7.87, lower than last year's $10.38. But the decline next year should ease to $7.83.

Analysts expect XME's earnings per share to fall from $7.08 last year to $5.45 this year. They expect it to fall moderately to $4.98 next year and rebound moderately to $5.25 in 2025.

Dividend return

Investors can not only enjoy the rise in stock prices, but also get some extra returns through dividends.

Currently, the dividend yield per share of XLE is close to 4%. Analysts expect that as profits eventually rise, this yield will also increase in the next few years.

For XME, the dividend yield this year is only slightly higher than 2%. But it is expected that dividend payments will increase as profits grow, and if profit expectations also increase, dividend payments will also receive additional boost.

These stocks look more and more worth buying. Any further decline should make investors more interested in them.