Business
Energy stocks are a great buy right now
Oil prices rose Monday morning after OPEC + decided on Sunday to continue the path of oil production cuts ahead of Implement a price cap of $60 On crude oil of Russian origin negotiated by the European Union, the Group of Seven and Australia. OPEC + agreed earlier to cut production by two million barrels per day, or about two percent of global demand, from November until the end of 2023.
However, oil prices are down more than 30% from their 52-week highs, while the energy sector, curiously enough, is only within 4% of its highs. Indeed, over the past two months, the leading benchmark in the energy sector, and SPDR Energy Sector Selection Fund (NYSEARCA: XLE), up 34% while average spot crude oil prices fell 18%. This is a notable difference because the relationship between the two over the past five years has been 77% and 69% over the past decade.
According to the Bespoke Investment Group via The Wall Street Journal, current split This is the first time since 2006 that the oil and gas sector has traded within 3% of its 52-week high while the price of WTI has fallen more than 25% from its 52-week high. It’s also only the fifth variation since 1990.
David Rosenberg, founder of an independent research firm Rosenberg Research & Associates Inc., He identified five main reasons why energy stocks are still being bought despite the failure of oil prices to make any significant gains over the past two months.
#1. Positive evaluations
Energy stocks are still cheap despite the huge rally. Not only has the sector broadly outperformed the market, but companies in this sector have remained relatively cheap, undervalued, and come with above-average projected earnings growth.
Rosenberg analyzed the percentages of polyethylene by energy stock by looking at historical data since 1990 and found that, on average, the sector ranks in only the 27th percentile historically. In contrast, the Standard & Poor’s 500 It sits at the 71st percentile despite the deep sell-off that occurred earlier in the year.
Image source: Zacks Investment Research
It includes some of the cheapest oil and gas stocks right now Ovintive Inc. (NYSE: OVV) by PE 6.09; Civitas Resources, Inc. (NYSE:CIVI) by PE 4.87, Enerplus Corporation (NYSE:ERF) (TSX:ERF) has a PE ratio of 5.80, Occidental Petroleum Corporation (NYSE:OXY) has a EPS of 7.09 while Canadian Natural Resources Limited (NYSE: CNQ) has a PE ratio of 6.79.
#2. Strong earnings
Strong gains for energy companies are among the main reasons why investors continue to flock to oil stocks.
Third-quarter earnings season is coming to a close, but so far it appears to be better than feared. according to FactSet Earnings InsightsFor the third quarter of 2022, 94% of S&P 500 companies reported Q3 2022 earnings, of which 69% reported a positive EPS surprise and 71% reported a positive revenue surprise.
The energy sector recorded the highest earnings growth among all the eleven sectors at 137.3% against an average of 2.2%. Standard & Poor’s 500. At the sub-industry level, all five sub-industries in the sector reported an increase in profits year-on-year: Oil and Gas Refining and Marketing (302%), Integrated Oil and Gas (138%), Oil and Gas Exploration and Production (107%), Oil and Gas Equipment and Services ( 91%), oil and gas storage and transportation (21%). Energy is also the sector in which the most companies beat Wall Street estimates at 81%. Positive revenue surprises reported by Marathon Petroleum ($47.2 billion vs. $35.8 billion), ExxonMobil ($112.1 billion vs. $104.6 billion), Chevron ($66.6 billion vs. $57.4 billion), Valero Energy ($42.3 billion vs. 40.1 billion). dollars), and Phillips 66 ($43.4 billion vs. $39.3 billion) was a significant contributor to the index’s higher revenue growth rate since September 30.
Better yet, the outlook for the energy sector remains bright. According to another Moody’s research reportOverall industry earnings will be flat in 2023, although they will come in just below levels reached at recent peaks.
Analysts note that commodity prices have fallen from very high levels earlier in 2022, but forecast that prices are likely to remain cyclically strong into 2023. This, combined with modest growth in volumes, will support the generation of strong cash flow for producers. oil and gas . Moody’s estimates that EBITDA in the US energy sector for 2022 will be $623 billion but will drop to $585 billion in 2023.
Analysts say lower capital expenditures, increased uncertainty about future supply expansion and a higher geopolitical risk premium will continue to support cyclically higher oil prices. Meanwhile, strong export demand from US LNG will continue to be supported Rising natural gas prices.
In other words, there are simply no better places for people investing in the US stock market to park their money if they are looking for serious dividend growth.. Moreover, the outlook for the sector remains bright.
While oil and gas prices have come down from recent highs, they are still much higher than they have been over the past couple of years hence the continued enthusiasm in the energy markets. In fact, the energy sector continues to be a huge favorite on Wall Street, with Zacks Oils and Energy ranking first out of all 16 Zacks-rated sectors.
# 3. Strong payouts to shareholders
Over the past two years, US energy companies have changed the rules of their previous game from using most of their cash flow for production growth to returning more money to shareholders via dividends and buybacks.
As a result, the combined earnings and buyback yield for the energy sector is now close to 8%, which is high by historical standards. Rosenberg notes that similar highs occurred in 2020 and 2009, which preceded periods of strength. By comparison, the combined dividend and repurchase yield for the S&P 500 is close to five percent, making one of the largest gaps in favor of the energy sector ever.
#4. Low stock
Despite slowing demand, US inventory levels are at their lowest since the mid-2000s despite the Biden administration’s attempt to drive down prices by flooding the markets with 180 million barrels of crude oil from the Strategic Petroleum Reserve. Rosenberg notes that other potential catalysts that could lead to additional upward pressure on prices include a Russian oil price cap, further escalation in the Russia/Ukraine war, and China’s move away from a zero COVID-19 policy.
#5. Include the “opc + mode” top
Rosenberg notes that OPEC+ is now more comfortable with oil trading above $90 a barrel versus the $60-70 range it has accepted in recent years. The energy expert says this is the case because the cartel is less concerned about losing market share to US shale oil producers because those have prioritized shareholder payments rather than strong production growth.
The new stance by OPEC+ provides better visibility and predictability of oil prices while prices in the $90 per barrel range can sustain strong pushes through dividends and buybacks.
By Alex Kimani for Oilprice.com
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Business
Bankman-Fried May File Petition in New York Federal Court Next Week Before Judge Louis Kaplan By Cointelegraph
Former FTX CEO Sam Bankman-Fried is set to appear in court on the afternoon of January 3 to enter a lawsuit over two counts of wire fraud and six counts of conspiracy against him related to the collapse of cryptocurrency exchange FTX, according to Reuters. mentioned on December 28, citing court records. Bankman-Fried will appear before District Judge Lewis Kaplan in Manhattan.
Judge Kaplan was appointed to hear the case on December 27 after the original judge in the case, Ronnie Abrams, Resigned herself because of connections between FTX and the law firm Davis Polk & Wardwell, where her husband is a partner. The company provided advisory services to FTX in 2021.
The US stock market, according to the S&P 500 index SPX typically rises just over 1% over that time period. With the exception of Thursday’s powerful session, Santa Claus is missing in action, but there is still time. A side effect of this system is that if the market Failure To record gains over the 7-day period, this is a negative sign going forward. Or as Hirsch so eloquently put it: “If Santa Claus fails to call him, bears may come to Broad and Wall.”
The SPX chart itself has resistance at 3900-3940, after crashing below 3900 in mid-December. So far, there has been support in the region of 3760-3800. Thus, the market is range bound in the short term. Don’t expect that to last for long. From a slightly longer-term perspective, there is heavy resistance reaching 4100, which is where the stock market rally in early December failed. On the downside, there should be some support at 3700, and then a yearly low at 3500. Of course, the bigger picture continues to be that of a bear market, with trend lines sloping down (blue lines in accompanying SPX chart). We do Not Have the McMillan Volatility Band (MVB) signal in place at this time. SPX needs to move outside of +/- 4σ “Adjusted Bollinger Bands” to produce such a signal.
There has been massive buying recently, and buying percentages have been steadily rising because of that. These ratios have been in sell signals for a few weeks now, and as long as they are trending higher, these sell signals will remain in place. This applies to all of our buy-to-buy ratios, especially the stock-only ratios (accompanying charts) and the total buy-to-buy ratio. The CBE’s share-only buying ratio hit a huge number on December 28, but there are some arbitrage implications there, so that number may be overestimated. the Basic The ratio is near its yearly highs, which means it is definitely oversold, and weighted The ratio is starting to approach oversold levels as well. However, “Oversold does not mean overbought.”
The market breadth has been weak, therefore our wide oscillators remain sell signals, albeit in the oversold territory. The NYSE Breadth Oscillator attempted to generate buy signals on two recent occasions, but ultimately failed. The “Stocks Only” display oscillator did not generate a buy signal. We also monitor the difference between these two oscillators, which is oversold as well – after a buy signal failed recently.
One area that is slightly improving is the new 52-week highs on the New York Stock Exchange. Over the past two days, the number of new highs has been over 60. That may not sound like much, and it really isn’t – but it’s an improvement. However, for this indicator to generate a buy signal, the number of new highs must exceed 100 for two consecutive days. This may be difficult at the moment. The most optimistic area is volatility (VIX, to be exact). VIX She is still in her own world. Yes, it has risen slightly over the past two days, in what appears to be a concession to the sharp drop in stock prices, but overall, the technical signals from the VIX are still bullish for stocks. There is a “peak high” buy signal in place, and VIX direction The buy signal is also still active. The VIX would have to close above the 200-day moving average (currently at 25.50 and falling) to cancel VIX direction Buy signal, and it would have to close above 25.84 (mid-December high) to cancel the ‘peak high’ buy signal.
the Building Derivatives volatility remains bullish in its outlook for stocks as well. The term structures of both VIX futures and CBOE volatility indexes slope upward. Furthermore, all VIX futures are trading at healthy VIX premiums. These are positive signs for stocks.
In short, we continue to maintain a “fundamental” bearish position, due to the bearish trend on the SPX chart and due to the recent breakdown below 3900. There are also negative signals from the Bought and Breadth ratios (although both are oversold). The only current buy signals come from the volatility complex. Therefore, we will continue to trade the confirmed signals around this “core” position.
New recommendation: Chevron (CVX) There is a new buy signal for the buy-to-buy ratio in Chevron Buy 1 CVX February (17The tenth) 180 calls
At 7.20 or less.
CVX: 177.35 Feb (17.35).The tenth) 180 call: 7.00 bid at 7,20,000
We will hold this position as long as CVX’s buy-to-buy ratio remains on a buy signal. Follow the movement:
All breakpoints are mental breakpoints unless otherwise noted.
We use our “standard” rolling procedure Spread: In any bull or bears vertical spread, if the basic hits the short strike, roll over the entire spread. That would be a roll Top In the event of a bull call spread or roll Down In the event of a bear outbreak. Stay at the same expiration, and keep the distance between strikes the same unless otherwise instructed.
Long 2 SPY Jan (20The tenth) 375 lays and shorts Jan 2 (20The tenth) 355 places: This is our “basic” bearish position. As long as the SPX remains in a downtrend, we want to maintain the position here. Long 2 KMB Jan (20The tenth) 135 calls: It is based on the buy-to-buy ratio at Kimberly-Clark Long 2 IWM Jan (20The tenth) 185 Calls Through the Money and Short 2 IWM Jan (20The tenth) 205 calls: This is our bullish seasonality basis between Thanksgiving and the second trading day of the new year. Get out of this iShares Russell 2000 ETF The position at the close of trading on Wednesday, January 4, the second trading day of the new year.
Long 1 SPY Jan (20The tenth402 call and Short 1 SPY Jan (20The tenth) 417 calls: This spread was bought at the close on December 13thThe tenth, when the most recent VIX “peak high” buy signal was generated. Stop yourself if the VIX closes later above 25.84. Otherwise, we will hold for 22 trading days.
Long 1 SPY Jan (20The tenth389 Lay and Short 1 Spy Jan (20The tenth) 364 put: This was in addition to our “core” bearish position, created when the SPX closed below 3900 on December 15th.The tenth. Stop out from this spread if it is SPX Close above 3940. Long 2 PCAR Feb (17The tenth) 97.20 puts: This puts on Paccar Purchased on December 20thThe tenth, when they finally traded at our buy limit. We will continue to maintain these positions for as long as possible weighted Buy-to-buy ratio on a sell signal.
Long 2 SPY Jan (13The tenth) 386 calls and Short 2 SPY Jan (13The tenth) 391 calls: This is a trade based on the seasonal positive “March of Santa Claus” time period. There is no downtime for this trade, except for time. If SPY is trading at 391, roll the entire spread up by 15 pips on each side. In any case, exit your spreads at the end of trading on Wednesday, January 4th (the second trading day of the new year).
All breakpoints are mental breakpoints unless otherwise noted.
Lawrence G. McMillan is the President of McMillan Analysis, a registered investment and commodity trading advisor. McMillan may hold positions in securities recommended in this report, either personally or in client accounts. He is an experienced trader, money manager, and author of the best-selling book, Options as Strategic Investing. www.optionstrategist.com Send questions to: lmcmillan@optionstrategist.com.
Disclaimer: © McMillan Analysis Corporation is registered with the Securities and Exchange Commission as an investment advisor and the CFTC as a commodity trading advisor. The information in this newsletter has been carefully compiled from sources believed to be reliable, but accuracy and completeness are not guaranteed. Officers or directors of McMillan Analysis Corporation or accounts managed by such persons may have positions in securities recommended in the advisory.
Beyoncé celebrates her sister Solange’s new music made for the New York City Ballet Kanye West shocks while wearing ‘White Lives Matter’ T-shirt at surprise Yeezy fashion show in Paris The Bank of England buys bonds in an attempt to stop the spread of the crisis Amazon will add 2,500 office jobs in Southern California Kylie Jenner debuted an Undone Bob in men’s underwear – see photos Elton John, Trump’s favorite, performs at the Biden White House YouTube channel broadcasting Alex Jones’ experience disrupted chat due to Sandy Hook conspiracy theories TikTok sued over girls’ deaths in viral ‘blackout challenge’Business
Opinion: The stock market is range-bound in the short term. Don’t expect that to last long.
SPX,
Struggled this week overall, during a typically seasonal upswing. This is what Yale Hirsch called the “Santa Claus Walk” 60 years ago. It covers the time period of the last five trading days of one year and the first two trading days of the following year.
VIX,
CVX,
Coming from an extreme oversold condition. So, we’ll take a long stand here:
spy,
KMB,
This ratio has now turned into a sell signal, so sell these calls to close the position.
iwm,
PCAR,
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Trump’s Facebook and Instagram accounts have been reinstated after a two-year ban
Hank and John Green launched the YouTube College Credit Program
Beyoncé celebrates her sister Solange’s new music made for the New York City Ballet
Kanye West shocks while wearing ‘White Lives Matter’ T-shirt at surprise Yeezy fashion show in Paris
The Bank of England buys bonds in an attempt to stop the spread of the crisis
