Displaying items by tag: valuation
In a piece for Marketwatch, Michael Brush covers an interesting dichotomy regarding the energy sector. Billionaires like Warren Buffett and company insiders are bullish as evidenced by their large buys since the beginning of the year. However, broader investor sentiment towards the sector remains bearish as evidenced by its low valuations and middling performance this year.
Brush believes that the odds favor insiders and Buffett being correct. He also notes that energy stocks are cheap relative to their price to earnings ratios on a 5-year average basis. He also sees OPEC+ cuts over the past few months as a bullish catalyst and notes some unusual factors for why they haven’t been effective in pushing prices higher already.
He believes that another bullish factor for energy is the relatively low amount of CAPEX. In 2022, investments in oil production were 40% below 2014. This is another positive tailwind for energy prices especially as demand should continue to remain resilient given that the US has so far avoided a recession.
He recommends seeking out energy stocks with strong patterns of insider buying, low valuations, and above-average yields and expects the sector to outperform in the second-half of the year.
Finsum: Energy stocks are exhibiting low valuations, insider buying, and aggressive buying by billionaires like Warren Buffett.
There’s no question that energy was the best-performing sector this year in what was a dismal year for equities. But how will the sector fare in 2023? If analyst expectations are correct, we could be in for another great year for energy stocks. According to FactSet data, analysts have increased estimates for only two sectors next year, energy and utilities. EPS estimates for energy stocks have seen a 4.4% rise in expectations, while utility stock estimates have risen 0.9%. This is in stark contrast to the other 9 sectors in the S&P 500, where analysts have been trimming their earnings per share forecasts for 2023, with downward revisions between September 30 and November 30. Due to these upward earnings expectations and relatively cheap valuations, energy stocks are poised to continue their rise next year, even as oil prices have pulled back from the year’s highs. Oil companies have been cautious despite the surge in oil prices earlier in the year. CIBC Private Wealth U.S. Sr. Energy Trader Rebecca Babin told Yahoo Finance Live that companies “are not making rash decisions about increasing production based on swings in oil prices. They are less levered. They are more disciplined, and they are super focused on returning to cash.” Plus, market strategists expect oil to move higher next year with China expected to reopen its economy after years of COVID closures.
Finsum:Energy stocks are expected to continue to move higher next year due to increased analyst estimates, relatively cheap valuations, and higher demand for oil by China.
Once you walk out the door for the last time – after, of course, knocking out the lights – as a financial advisor, you know your job isn’t really done.
After all, succession planning is a mucho factor to ensure your brand, not to mention your clients, continue to thrive, according to figmarketing.com.
Along those lines, a few important questions to mull toward laying a foundation:
What valuation do you attach to your firm?
An ongoing revenue stream or lump sum payment. Which floats your boat?
Do you envision partnering with your successor to train and guide them, or do you prefer an outright sale?
When it comes to your firm, any heirs whom might be interested in it?
Of course, your departure is among a gaggle of them looking your profession in the rearview mirror. In the next five years, according to a study by Schwab of RIAs and recruitment, 70,000 new advisors will be needed in the financial planning industry – just to keep pace with the burgeoning number of those in the market for input in areas like the purchase of a home and retirement, reported financial-planning.com.
And, hey, the additional planners needed to replace those who retire or leave for other industries aren’t even accounted for in the study.
In their latest strategy release Morgan Stanley is pulling no punches about its projections for 2022, warning investors to unload and underweight U.S. Stocks, Bonds and Treasuries. They see tightening monetary policy, high inflation, and higher valuations all scaring them from a more bullish U.S. stance. They see the S&P dropping to almost 6% below its current levels. In order to find the gains they need they suggest investors look to Euro-area and Japanese companies, where they are bullish on equity prices. They also see commodities providing some portfolio relief. However, Morgan Stanley’s economists aren’t predicting a rate rise until 2023, and they see the Fed being more dovish than the broader market expects.
FINSUM: Conflicting messages inside Morgan Stanley. If Monetary Policy doesn’t over tighten then don’t expect a sluggish year in the U.S.
Environmental, social, and governance investing drew in almost $35 trillion last year and that number is expected to grow another 42% by 2025, and while those dollars might be better for the environment the large inflows from unseasoned investors are pushing ESG into a price bubble. Large inflows are can disregarding traditional financial discipline which can affect debt/equity ratios, dividends, and distort valuations for future mergers and acquisitions. New companies in the onset of their financial growth are already being evaluated at 15 times revenue, on top of that investments in the traditional sector are suffering as outflows continue this could cause supply shortages and further inflation. Continued inflows into ESG could swell the bubble further and risk a collapse.
FINSUM: ESG could be swelling into risky territory, investors should be cautious particularly with retirement vehicles.