Analysts eye confident return of energy next year
After a blistering surge this year, energy equities have taken a respite.
Since this time last month, the S&P 500 sector has been down more than 4%. Meanwhile, West Texas Intermediate crude has dropped 16 percent over the same period, owing to concerns over the introduction of the omicron, a COVID variation. In addition, the unwinding of a price spike in 2021 has put pressure on oil markets.
JPMorgan analysts, on the other hand, believe energy can reclaim the top spot in 2022. Favorable commodity prices, strong balance sheets, and capital return strategies were credited by the company. This move was cited by the firm as a cause to be positive, with Exxon Mobil, Phillips 66, and Suncor Energy being three of its top picks.
Studying the pre-pandemic for better future
Nancy Tengler, the CEO and chief investment officer of Laffer Tengler Investments, is a big fan of energy and has invested in firms like Diamondback Energy. She claims it’s too early to sell, but she wouldn’t buy it at current prices.
′′We also recently added to Phillips as part of the JPMorgan upgrade, which I believe makes sense for a variety of reasons. The company is going through a cost-cutting process. They appear to be making progress on some of their execution issues. Even though omicron has impacted the headlines, we believe the oil boom will continue,” Tengler told reporters on Thursday.
Phillips 66 climbed marginally on Thursday, despite the market’s and crude oil’s declines for the day. However, the stock market has underperformed this year, with only a 3% gain.
“It will take until July 2023 for the United States to restore supply to pre-pandemic levels.” So I believe the price of oil will continue to rise, and I believe there are still opportunities for you to profit in this industry,” she stated.
During the same section, Boris Schlossberg, managing director of FX strategy at BK Asset Management, stated, “I don’t think investors need to overthink this.” “I believe you could simply stay long XLE, which is currently yielding a lovely [3.8 percent].”
All of the key sector stocks are held in the XLE energy ETF. It’s down 4% from its late-October highs.
“One of his favorite yield-enhancing strategies is to simply belong the XLE and then sell somewhat out-of-the-money puts on it, say 180 days out, to just really boost your yield.” That was something I did in the last six months. He added, “It’s worked out nicely.” “At this moment, owning an XLE is a no-brainer.”