Stock Week Ahead: Oil Still Good for Energy Stocks


Energy stocks fell last week as oil prices fell. But crude prices are still up almost 20% so far in 2022, making the sector one of the few bright spots in the market this year. (Actually an oil stock with the symbol FANG, Diamondback Energy (CROC)is up 25%).
Two of the leading exchange-traded funds in the energy sector, the SPDR Energy Select Sector Fund (XLE) and the iShares US Energy ETF (IYE)are each up more than 45%.
western oil (OXY)an energy company backed by Warren Buffett Berkshire Hathaway (BRKB), is up almost 140% this year. That makes it by far the best performing stock in the S&P 500. (Berkshire currently owns about 20% of Occidental, and US federal regulators recently approved a request from Berkshire to take a 50% stake).
Berkshire is also a major investor in Chevron (CLC), which has risen more than 30% this year and is the top Dow Jones stock. And the top ten S&P 500 stocks are all in the oil sector, including Hesse (IT IS), ExxonMobi (XOM)ground Conoco Phillips (COP).
Meanwhile, Facebook’s parent meta-platforms, Apple (AAPL), Amazon (AMZN), netflix (NFLX) and owner of Google Alphabet (GOOGL) are all significantly lower.
Technologies are not the only part of the market that is in shock. Most major stocks are in the red this year. Same goes for meme stocks CMA (CMA), Bed bath and beyond (BBBY) and GameStop (EMG). Bitcoin and other cryptos also fell. This is why the performance of oil stocks really stands out.

Some experts believe the boom in energy stocks is still in its early stages, despite this year’s big move.

“The oil sector has long benefited from structural tailwinds,” said Matt Cole, chief product and investment officer at Strive Asset Management. “There is a shortage of supply, so there is always a bullish case.”

Strive has a new US energy ETF that has the ticker symbol DRLL. The fund is passively managed and tracks a leading oil stock index. Exxon Mobil, Chevron and ConocoPhillips are the largest holdings.

Cole isn’t too concerned about the recent pullback in energy prices. He said that as long as oil costs remain high, energy companies should hit the cash.

Monday’s big meeting of OPEC+ countries could also give crude prices a boost. There is speculation that oil-producing countries could reduce their crude production.
Cole also isn’t worried that the recent weakness in oil prices is a sign of weaker demand. The price swings may be more due to a stronger dollar, which generally lowers commodity prices. Fears of an impending recession in the United States have also started to fade thanks to a still resilient labor market and stabilizing inflationary pressures.

In other words, oil prices should remain stable. This may not be a repeat of 2008, when crude prices plunged into the depths of the Great Recession/global financial crisis.

“You don’t need crude prices to rise. They just need to stay supported at a relatively high level and energy companies will be massively profitable,” Cole said.

To that end, analysts currently forecast Exxon Mobil to report annual earnings of nearly $53 billion for 2022. That’s more than double last year’s earnings. Chevron’s net income is also expected to more than double, to $36.2 billion.

“Energy stocks remain the best bet because as long as oil prices remain above $80 a barrel, they will continue to post record sales and earnings,” Louis Navellier, chairman of Navellier & Associates, said in a statement. report. He also noted that the stocks are trading at fairly low valuations based on earnings estimates and are also paying big dividends.

Exxon, for example, is trading for less than eight times the 2022 earnings forecast, a huge discount to the broader market. The S&P 500 is valued at around 19 times this year’s earnings projections. Exxon also pays a dividend that yields nearly 3.8%, compared to a yield of around 3.2% for a 10-year US Treasury note.

Cole also said investors should definitely pay attention to the fact that Buffett recently made a big bet on oil stocks.

“Buffett’s legacy was finding profitable businesses and buying them when they were extremely cheap,” he said. “And I think that’s the environment for that with rising interest rates.”

Could the new iPhones boost Apple stock?

Buffett is also a huge Apple fan. Berkshire has a stake of more than 5.5% in the company, making it the iPhone maker’s second-largest holder, behind mutual fund giant Vanguard.

Apple’s stock, like other technologies, is down this year. But the shares are only about 10%. This is a lower drop than other FAANGs. Apple also didn’t fall as much as the Dow Jones, S&P 500 and Nasdaq.
Here's what could drive up the prices of the newest iPhones
And there could be more good news on the horizon for Apple. The company is hosting an event on Wednesday and is expected to widely unveil its new iPhone 14.

Apple shares tend to be volatile on product announcement day, often falling after the news is released. But make no mistake. Investors are eager to see a new line of phones as it should boost the company’s revenue and sales.

The launch of the iPhone 14 could also give fresh impetus to Apple’s lucrative services division, which includes subscriptions for things like Apple Music, iCloud and Apple TV+. Services revenue accounted for nearly 25% of Apple’s overall sales in its most recent quarter.

Next

Monday: US stock exchange closed for Labor Day; OPEC+ meeting; the new British Prime Minister will be appointed

Tuesday: US ISM Services Index

Wednesday: Apple event; US trade balance; American Beige Book; China trade data; Earnings of Nio (NIO) and GameStop
Thursday: Fed Chairman Jerome Powell speaks at the Cato Institute; weekly jobless claims in the United States; ECB rate decision; GDP of Japan; Earnings of HR (HR) and DocuSign (DOCUMENT)
Friday: inflation in China; EU meeting on energy crisis; Earnings of Kroger (KR)


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