Very Bad News For Energy Stocks

seekingalpha03-19

Energy stocks have massively outperformed the S&P 500 since late 2020.We look at the major factors driving this trend and evaluate how sustainable they are.We also share some negative developments for...

Source Link

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap

Leave a comment

{"i18n":{"language":"en_US"},"isChannel":false,"data":{"share":"https://ttm.financial/m/news/2420325223?lang=en_US&edition=fundamental","thumbnail":"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1639158401/image_1639158401.jpg","is_english":true,"pubTime":"2024-03-19 20:15","share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","id":"2420325223","market":"sg","top_or_hot":-1,"title":"Very Bad News For Energy Stocks","media":"seekingalpha","content":"<div>\n<p>Energy stocks have massively outperformed the S&P 500 since late 2020.We look at the major factors driving this trend and evaluate how sustainable they are.We also share some negative developments for...</p>\n\n<a href=\"https://seekingalpha.com/article/4679084-very-bad-news-for-energy-stocks\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Very Bad News For Energy Stocks</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nVery Bad News For Energy Stocks\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-03-19 20:15 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4679084-very-bad-news-for-energy-stocks><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Energy stocks have massively outperformed the S&P 500 since late 2020.We look at the major factors driving this trend and evaluate how sustainable they are.We also share some negative developments for...</p>\n\n<a href=\"https://seekingalpha.com/article/4679084-very-bad-news-for-energy-stocks\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BIP","symbol_name":"布鲁克菲尔德公共建设","start_time":0,"source_url":"https://seekingalpha.com/article/4679084-very-bad-news-for-energy-stocks","article_id":"2420325223","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1639158401/image_1639158401.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2420325223","pubTimestamp":1710850500,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Energy stocks have massively outperformed the S&P 500 since late 2020.We look at the major factors driving this trend and evaluate how sustainable they are.We also share some negative developments for","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BIP":"布鲁克菲尔德公共建设","BN":"Brookfield","IVV":"标普500指数ETF","BRK.B":"伯克希尔B","XLE":"SPDR能源指数ETF","LU2133065610.SGD":"JPMorgan Investment Funds - Global Dividend A (mth) SGD","AMLP":"Alerian MLP ETF","EPD.AU":"Empired Ltd","CVX":"雪佛龙","NWS":"新闻集团","LU1496350502.SGD":"FRANKLIN DIVERSIFIED DYNAMIC \"A\" (SGDHDG) ACC","BK4201":"综合性石油与天然气企业","BK4176":"多领域控股","PAGP":"Plains Group Holdings LP","WES":"Western Midstream Operating, LP.","BRK.A":"伯克希尔","LU0889566641.SGD":"FTSF - Templeton Shariah Global Equity A Acc SGD","OEX":"标普100",".SPX":"S&P 500 Index","OEF":"标普100指数ETF-iShares","LU0417517546.SGD":"Allianz US Equity Cl AT Acc SGD","SPY.AU":"SPDR® S&P 500® ETF Trust","LU0048573561.USD":"FIDELITY AMERICA \"A\" (USD) INC","BK7153":"综合零售","BK4534":"瑞士信贷持仓","BK4533":"AQR资本管理(全球第二大对冲基金)","ET":"Energy Transfer LP","LU0640476718.USD":"THREADNEEDLE (LUX) US CONTRARIAN CORE EQ \"AU\" (USD) ACC","LU1162221912.USD":"FRANKLIN INCOME \"A\" (USD) ACC","PAA.AU":"PHARMAUST LTD","SSO":"两倍做多标普500ETF","SDS":"两倍做空标普500ETF","SPXU":"三倍做空标普500ETF","XOM":"埃克森美孚","OXY":"西方石油","BAM":"布鲁克菲尔德资产管理","SG9999002232.USD":"Allianz Global High Payout USD","SH":"标普500反向ETF","SG9999002224.SGD":"Allianz Global High Payout SGD","PAA":"Plains All American Pipeline L.P","LU2237438978.USD":"Amundi Funds US Pioneer A2 (C) USD","UPRO":"三倍做多标普500ETF","LU0320765489.SGD":"FTIF - Franklin Mutual US Value A Acc SGD","WES.AU":"WESFARMERS LTD","EPD":"Enterprise Products Partners L.P","LU2347655156.SGD":"JPMorgan Investment Funds - Global Income A (icdiv) SGD-H","IE00BWXC8680.SGD":"PINEBRIDGE US LARGE CAP RESEARCH ENHANCED \"A5\" (SGD) ACC","SPY":"标普500ETF","LU0070302665.USD":"FRANKLIN MUTUAL U.S. VALUE \"A\" (USD) ACC"},"translate_title":"能源股的坏消息","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"AMLP":1,"XOM":1,"XLE":1,"WES.AU":1,"WES":1,"SPY.AU":1,"SPY":1,"PAGP":1,"PAA.AU":1,"PAA":1,"OXY":1,"NWS":1,"ET":1,"EPD.AU":1,"CVX":1,"BRK.A":1,"BN":1,"BRK.B":1,"BIP":1,"BAM":1,"EPD":1,"UPRO":0.6,"SSO":0.6,"SPXU":0.6,"SH":0.6,"SDS":0.6,".SPX":0.6,"OEX":0.6,"OEF":0.6,"IVV":0.6,"ESmain":0.6},"content_text":"Energy stocks have massively outperformed the S&P 500 since late 2020.We look at the major factors driving this trend and evaluate how sustainable they are.We also share some negative developments for the energy sector and why investors may be prudent to grow a bit cautious in the sector.tumsasedgars Energy stocks (XLE) have been on a tear since we launched our portfolio back on December 3, 2020, significantly outperforming the S&P 500 (SPY) over that period of time: Data by YCharts Exxon Mobil (XOM) and Energy Transfer (ET) are two blue-chip energy stocks that have been particularly big winners over that span, helping to lead the sector higher: Data by YCharts In this article, we will discuss the reasons for energy's strong outperformance in recent years and why the outlook is less rosy moving forward. Why Energy Has Outperformed So Strongly The reasons for XLE's strong outperformance are many, but some of the main drivers include: The energy sector crashed hard in the wake of the COVID-19 outbreak in 2020, leaving it standing at very low valuations in late 2020. As the COVID-19 outbreak fizzled out and the global economy re-opened, valuation multiples expanded significantly, helping to fuel a big part of the sector's outperformance.  Data by YCharts  Another reason why energy has done so well is due to the rapid rise in interest rates. While normally, rising interest rates would be a headwind to just about any equity, in this case, it helped the fossil fuels industry because (1) its main competition - the renewable power sector - requires significant upfront capital investment to be able to grow rapidly. With the cost of capital rising so rapidly, it has slowed the pace of renewable power build-out, thereby preserving demand for and increasing the value of the existing energy infrastructure of the fossil fuels industry, and (2) the energy industry slashed spending on growth projects in the wake of declining access to capital and increasingly bearish expectations for future demand due to the rise of ESG investing and bullishness around renewable energy. As a result, when interest rates soared and the market began to place a premium on businesses with strong balance sheets that were not dependent on capital markets to fund operations, many energy businesses suddenly became very attractive places to invest. The aforementioned steep decline in growth investments in new fossil fuel energy production and infrastructure also made existing assets much more valuable. This became particularly true in the wake of Russia's invasion of Ukraine and the corresponding Western sanctions on the energy production giant, which left Europe suddenly scrambling elsewhere for energy security given that they were previously heavily dependent on Russia for energy. Energy has also benefited from the attractive combination of the strong resurgence in energy consumption in the wake of the global economy reopening after COVID-19 as well as the high inflation facing the world since energy is a proven beneficiary of high inflation. Finally, the energy sector's pivot away from investing in growth towards strengthening company balance sheets and generating free cash flow has positioned these companies to become generous returners of shareholder capital, leading to significant dividend growth and substantial buyback programs.  Given all of these positives, it should be of little surprise that leading global infrastructure investors like Brookfield (BN)(BAM)(BIP) have been loading up on energy midstream infrastructure (AMLP) and even Berkshire Hathaway's (BRK.A)(BRK.B) Warren Buffett has been buying Occidental Petroleum (OXY) hand-over-fist on top of his other holdings of substantial energy and infrastructure assets, including a position in Chevron (CVX). Why Energy's Strong Run May Be Coming To An End While the bullish arguments for energy are many, there are also reasons to be a bit wary of the sector's forward prospects. These include:  After such a strong recent run, many energy stocks are no longer the compelling bargains that they were several years ago. While inflation remains a bit sticky, it is generally trending down. Most of the world's major economies are in recession and/or facing major challenges, which are weighing on energy demand. While the U.S. is continuing to churn forward with economic growth, it is likely only a matter of time before it too will succumb to an economic slowdown. In fact, recent data releases indicate that both the U.S. labor market and consumer spending are weakening while the yield curve - a pretty reliable indicator of recessions - remains deeply inverted. China seems to be bent on reducing its demand for imported energy by rapidly building up its oil reserves, recently discovered a massive oil reserve that should significantly improve its energy independence, and is building out hundreds of gigawatts of solar and wind power farms in its huge Gobi desert. Many leading companies around the world are investing aggressively in reducing their carbon footprints by favoring renewable energy over fossil fuel consumption to meet their energy needs. Political and corporate support for renewable energy remains strong. Moreover, enormous sums of money continue to be poured into developing increasingly efficient methods of generating renewable energy. The longer this trend continues, the less and less competitive fossil fuel energy will be. While fossil fuels will remain in demand for decades to come, incremental reductions in demand for them due to economic slowdowns, falling inflation, and growing demand for renewable power all could stunt the sector's total returns moving forward.  Investor Takeaway Energy has been a great place to invest over the past three-plus years and we ourselves have invested aggressively in it as our largest single sector for much of that period. In particular, our investments in the midstream sector, including highly profitable forays into ET, Plains All American (PAA) (PAGP), Enterprise Products Partners (EPD), and Western Midstream Partners (WES) have helped to fuel our substantial market outperformance while also giving us very high and growing yields.  However, moving forward it appears that the low-hanging fruit has already been picked in the sector. While we do remain bullish on a few positions in the sector and are maintaining significant exposure to it, we are growing increasingly cautious and expect to gradually and opportunistically reduce some of our exposure depending on how market conditions evolve moving forward.","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.22.4","shortVersion":"4.22.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2420325223"}