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Energy stocks are a great buy right now

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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.

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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.

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#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.

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#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.

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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.

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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.

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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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MicroStrategy is at its lowest level since 2020 after the sales were revealed

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(Bloomberg) — Shares of MicroStrategy touched their lowest level since August 2020 after the enterprise software company, which in recent years has been known as the largest buyer of bitcoin, revealed its first sale of the token.

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The stock fell 1.1 percent to $136.63 on Thursday, down 75 percent this year. Bitcoin rose less than 1% to around $16,590 and is believed to have fallen 64% since the start of the year.

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In a filing on Wednesday, MicroStrategy said it acquired approximately 2,395 Bitcoin between the beginning of November and December 21 through its subsidiary MacroStrategy, and paid out approximately $42.8 million in cash. It then sold 704 of the tokens on Dec. 22 for a total of about $11.8 million, citing tax purposes, before buying another 810 of them two days later.

Matt Malley, chief market strategist for Miller Tabak + Co. Step down as CEO. This news means they don’t seem to want to do that anytime soon.”

Overall, MicroStrategy held about 132,500 bitcoins worth over $4 billion USD as of December 27th. The company paid an average purchase price of $30,397 per bitcoin.

“Given MicroStrategy’s $2.4 billion in leverage, we believe the company may have a lot of leverage over Bitcoin, and may face some liquidity risk,” Jefferies analyst Brent Thiel wrote in a note on Wednesday. Thill has an “underperform” rating on the stock and a price target of $110.

Over the years of the pandemic, MicroStrategy has become well known for its Bitcoin takeovers, largely led by Saylor. Earlier this year, Saylor stepped down from that role and now serves as CEO at the company and continues to lead its bitcoin strategy.

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MicroStrategy was trading around $120 before Saylor first announced the company’s Bitcoin purchases in 2020. The stock reached an all-time high of $1,315 in February 2021.

(Updates to include the stock’s closing price in the second paragraph.)

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Bankman-Fried May File Petition in New York Federal Court Next Week Before Judge Louis Kaplan By Cointelegraph

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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.