Displaying items by tag: energy
Oil stocks were some of the best investments last year as the energy sector gained 64.56%. Oil stocks could once again have another good year if oil prices rise as investors and firms expect them to. According to the latest Bloomberg MLIV Pulse survey, both professional and retail investors see higher oil prices over the next six months, with retail traders, in particular, even more bullish than professional investors. Investors are not alone in predicting a rise in oil prices. The Federal Reserve Bank of Dallas recently surveyed 152 energy firms in Texas, Louisiana, and New Mexico. Based on the results of the survey, the industry is expecting marginally higher oil prices in 2023. When asked what they believe the price of WTI would be at the end of the year, the average answer was $84 per barrel. The spot price for WTI was $73.67 at the time of the survey. The are several reasons for companies and investors to be bullish on oil this year. Oil prices could rise on optimism that China reopens its economy after implementing severe COVID restrictions. In addition, both OPEC and the International Energy Agency (IEA) see the global oil market tightening in the second half of the year. With the supply of global oil below the demand, prices should rise.
Finsum:Both investors and energy firms expect the price of oil to rise based on China's reopening and OPEC and IEA’s view that the global oil market is tightening.
Last year was a notable year for ESG investing. While ESG funds dealt with underperformance, anti-ESG initiatives, and regulation, demand continued to be strong for these funds. This year could be just as eventful for the strategy. First, there were record numbers of shareholder resolutions filed at public companies last year due to the SEC’s friendlier stance on them. That is expected to continue as companies set climate-related targets and shareholders press them on ESG matters. Second, while 57% of institutions expect the energy sector to outperform the market again this year, according to Natixis’ Global Survey of Institutional Investors, 46% said that they are increasing investments in renewables, twice the rate of those increasing investments in fossil fuels. Third, while the SEC has proposed a set of rules designed to help curb greenwashing, firms have a bigger motivator to stop, sweep examinations. According to Michael McGrath, a partner at K&L Gates, “That has had a greater impact on the approaches of firms to their ESG marketing actions thus far than have the new rules. That’s really because firms have an immediate concern that needs to be addressed.” The last theme to watch is anti-ESG initiatives. Asset managers that are focused on sustainable investing will have to accept the fact that they may not be competitive in some markets.
Finsum:2022 was a highly eventful year for ESG investing and this year will be no different due to themes such as shareholder resolutions, increased investments in renewables, SEC sweep examinations, and continued anti-ESG initiatives.
In a year when almost every S&P 500 sector was in the red, the energy sector surged 64.56%, according to S&P data. While the portfolios of energy investors looked great, energy bills for the home were another story. High energy prices took a bite out of the household budgets for many. However, a reversal seems to be in play this month. The energy sector is now under pressure as natural-gas prices have fallen more than 60% from their 52-week high due to a warmer-than-expected winter. While energy prices falling is good for household budgets, it’s bad news for energy stock investors. Matt Portillo, head of research at Tudor, Pickering, Holt, told Barron’s that “The warmer-than-expected winter pulled forward the expected decline in natural gas price. Stocks could fall an additional 20% to 30% until they find a bottom.” Wall Street analysts expect more volatility in natural-gas prices in the months ahead, but patient investors can look forward to better valuations for energy stocks in the second half of the year. Paul Diamond, an analyst at Citigroup, wrote in a note Tuesday that “We expect the coming volatility to present a better entry point than is currently available and expect recent volatility to persist through the winter, at which point eyes will turn to the build for next winter.”
Finsum:With natural gas prices falling due to a warmer-than-expected winter, energy stock prices have taken a hit, which could lead to more attractive valuations in the second half of the year.
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.
The energy sector has been the top-performing sector so far this year, but it may be time to sell. That is according to JPMorgan's Marko Kolanovic. Kolanovic, who is JPMorgan’s chief global markets strategist, recommends that investors sell out of energy stocks to capitalize on the performance divergence between oil and energy stocks. Oil prices surged more than 72% at the beginning of the Russia-Ukraine war, but have since plunged almost 50% and are now down for the year. The decline in WTI and Brent Crude Oil can be seen at the pump as the average price for a gallon of gas in the U.S. fell to $3.32 on Friday after previously hitting $5 earlier in the year. However, as oil prices have fallen, oil stocks are still trading near their multi-year highs. Historically, oil prices and energy stocks have been highly correlated, but the large difference this year and a broad pullback in the equity market could result in a selloff in energy stocks. Kolanovic believes that investors could take advantage of this by selling energy stocks now and then buying them at a lower price before the next upswing.
Finsum:JPMorgan strategist recommends selling energy stocks now before a major pullback that could be driven by the divergence between falling oil prices and rising energy stocks.