To The Moon

🌟🌟🌟Jerome Powell, the US Federal Reserve Chairman said that the time has come to cut interest rates at the next FOMC meeting on September 18.  This sets the stage for a weaker US Dollar which is bullish for commodity prices such as oil and gold.

$Energy Select Sector SPDR Fund(XLE)$ seeks to provide exposure to companies in the oil, gas and consumable fuel, energy equipment and related service industries.    In just 1 trade I gain access to the Big US Oil Giants trading within the S&P500 Universe.

XLE is the largest ETF in the Energy Sector with Assets Under Management of USD 37.26 billion.  It also has one of the lowest Expense ratio at just 0.09%.

The Top 10 holdings include $Exxon Mobil(XOM)$  $Chevron(CVX)$ EOG Resources, Conoco Phillips, Schlumberger Ltd, Marathon Petroleum, Phillips 66, Williams Cos Inc, Oneok Inc and Valero Energy Corp. 

Warren Buffett's favourite oil company $Occidental(OXY)$  is in Top 11 position. 

Top 10 weightage is 74.7%. Total number of holdings is 24.  Dividends are paid every 3 months. The current dividend yield is 3.2%.  XLE goes ex Dividend on September 23 2024.

Exxon Mobil is the largest US Oil and Gas company with a market capitalisation of USD 524.01 Billion.  

In August this year, Exxon Mobil posted its 2nd highest results for the 2nd quarter in the past decade as it achieved record production in Guyana and the Permian Basin.  According to CEO Darren Woods, the oil production in the 2nd quarter is the highest level the company has produced since Exxon and Mobil merged in 1999.

Exxon beat Wall Street earnings expectations.  Its Earnings per share was USD 2.14 versus USD 2.01 expected.  Its Revenue was USD 93.06 versus USD 90.99 billion expected.  Exxon posted net income of USD 9.2 billion, an increase of 17% compared to USD 7.9 billion a year ago.  

Exxon's acquisition of Pioneer Natural which was completed in May, contributed USD 500 million to Exxon's earnings. 

Exxon's shares are up 15% year todate and in 2023, it has risen 6%.  Exxon is XLE's Top holding with 23.8% weightage. 

$Chevron(CVX)$ is the 2nd largest US Oil company with USD 270.59 billion in market capitalisation.  Chevron 's Q2 24 earnings missed Wall Street expectations due to lower refining margins and delays to its pending acquisition of Hess Corporation.  

Chevron' s earnings per share was USD 2.55 versus USD 2.93.  However its revenue was USD 51.18 billion higher than USD 50.8 billion expected. 

Chevron's net income declined 26% to USD 4.43 billion from USD 6.01 billion a year ago.   Chevron posted a profit of USD 2.16 billion, a 31% increase over USD 1.64 billion a year ago due to higher sales volumes and oil prices. 

Chevron's shares are  down 1% year todate and has dropped 8% in 2023.  Chevron takes up 16.7% weightage in XLE. 

EOG Resources is a US independent oil and gas company that explores, develops, produces and markets crude oil and natural gas.  Its oil fields are located in the US, Trinidad, Canada and the UK. 

EOG Resources reported Q2 24 earnings with Earnings Per Share of USD 3.16 which beats Wall Street expectations of USD 2.98.  Total quarterly revenue was USD 6.03 billion versus expectations of USD 6.07 billion.  EOG Resources strong earnings was due to  higher oil production volumes and higher prices achieved for its crude oil and natural gas liquids. 

EOG Resources is up 5.9% year to date and on 2023, it was flat at 0.16%.

These are just some important information on the best oil stocks in XLE. 

I bought XLE in 2021 just before the Ukraine war started and it has rewarded me with a 54% jump on capital growth over time. 

Apart from the Ukraine war, there is now the conflict in the Middle East as well.  OPEC has also reduced their oil production in an official collective cut of 2 million barrels per day sine October 22.   In addition some OPEC members are enforcing  an additional voluntary cut of 1.66 million barrels per day agreed in April 2023 and another voluntary cut of 2.2 million barrels per day as agreed in November 2023.  

Just 2 days ago, Libya said that it could not produce or export any oil because of protests that led to a shutdown of Eastern Libyan oil fields.  That represents a loss of approximately 700,000 barrels of oil in supply. 

There is also a current ban on Russian energy by US and its allies which would certainly benefit the US Oil Giants. 

Performance wise XLE is up 7.7% year todate and just 0.6% in 2023.  However if we look back 5 years ago, XLE is up 58%.  Since its inception in December 18 1998, XLE is up 286%.

Wall Street Analysts are bullish on XLE with a Buy rating, Target price of USD 107.54, an upside potential of 17% according to 24 analysts surveyed by Tipranks. 

Apart from geopolitical conflicts which may cause the price of oil to rise, the world population is going to increase by about 25% between now and 2050. That means more energy consumption especially in countries like India and China. 

AI is also expected to create significant new demand for energy in the coming years.  Take for example Nvidia is expected to ship 1.5 million AI server units per year by 2027.  These 1.5 million servers, running at full capacity, would consume at least 85.4 terawatt hours of electricity annually.  This is far more than what many small countries could use in a year. 

That is why I am bullish on XLE and intend to hold it long term to reap the rewards of its exponential growth ahead.  I believe that XLE ETF is a great way to invest in energy as it gives me diversification in my portfolio and best of all, it pays a solid dividend every 3 months.   

Dividends provide me with a great source of passive income while waiting for capital growth.  That is how I intend to achieve my goal of FIRE - Financial Independence Retire Early! 

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