Investing

is now the time to invest in oil stocks?

  • Last Updated:
  • May 18th, 2022 8:33 pm
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Deal Addict
Jul 30, 2012
1443 posts
1904 upvotes
jerryhung wrote: Looks like we need $100 oil to save TSX or US Markets :P only thing up in 2022

not FAANG nor SHOP or Banks/everything else
I've talked about US concentration (i.e. inflation) risk before... NASDAQ & SP500 are very much correlated due to Tech concentration (really Market Cap concentration in a few Tech names). With 25% in the SP500 & well over 50% in the NASDAQ, a $100 WTI will only exacerbate compression on US indexes, not help them. US markets are showing the cracks of too few of names with high market caps that are not inflation-hedged (look at the damage FB caused in the US indexes).

If playing the inflation card, one needs to focus on Commodity based markets (CAN, AU, etc). I fully expect US Markets to continue under performance in the near-mid term.
Deal Expert
Jan 27, 2006
19508 posts
12574 upvotes
Vancouver, BC
DealRNothing wrote: I've talked about US concentration (i.e. inflation) risk before... NASDAQ & SP500 are very much correlated due to Tech concentration (really Market Cap concentration in a few Tech names). With 25% in the SP500 & well over 50% in the NASDAQ, a $100 WTI will only exacerbate compression on US indexes, not help them. US markets are showing the cracks of too few of names with high market caps that are not inflation-hedged (look at the damage FB caused in the US indexes).

If playing the inflation card, one needs to focus on Commodity based markets (CAN, AU, etc). I fully expect US Markets to continue under performance in the near-mid term.
Yep but that's the index investing version.

One can still invest in the US but not use normal market-weighted indexes and get decent returns - ie sector funds, equal weighted index funds, or individual stocks. Basically, anything that reduces the weight of the big tech funds in your investment will probably do alright.
Sr. Member
Sep 28, 2011
640 posts
1052 upvotes
Winnipeg
DealRNothing wrote: I've talked about US concentration (i.e. inflation) risk before... NASDAQ & SP500 are very much correlated due to Tech concentration (really Market Cap concentration in a few Tech names). With 25% in the SP500 & well over 50% in the NASDAQ, a $100 WTI will only exacerbate compression on US indexes, not help them. US markets are showing the cracks of too few of names with high market caps that are not inflation-hedged (look at the damage FB caused in the US indexes).
Other than the big names, I agree the rest of tech is a weak if inflation is an issue. But, in terms of hedges, Amazon, Google, Microsoft and Apple are the richest companies in the world with significant pricing power, since they have no competition and offer services every needs.
Deal Addict
Jul 30, 2012
1443 posts
1904 upvotes
DealRNothing wrote: I've talked about US concentration (i.e. inflation) risk before... NASDAQ & SP500 are very much correlated due to Tech concentration (really Market Cap concentration in a few Tech names). With 25% in the SP500 & well over 50% in the NASDAQ, a $100 WTI will only exacerbate compression on US indexes, not help them. US markets are showing the cracks of too few of names with high market caps that are not inflation-hedged (look at the damage FB caused in the US indexes).

If playing the inflation card, one needs to focus on Commodity based markets (CAN, AU, etc). I fully expect US Markets to continue under performance in the near-mid term.
bigblue1ca wrote: Other than the big names, I agree the rest of tech is a weak if inflation is an issue. But, in terms of hedges, Amazon, Google, Microsoft and Apple are the richest companies in the world with significant pricing power, since they have no competition and offer services every needs.
Amazon, Netflix are already trying to play the increase in subscriptions game...Agree some of these businesses have a bigger moat but inflation affects growth rates. Market isn't taking kindly to stocks that will not be able to sustain significantly higher growth than '21 to justify the multiples.

Amazon came off of strong Q4, but generally all Tech is likely going to be looking at more muted revenue / earnings growth in '22. Inflation effects aren't fully priced into the US market yet (higher fuel prices, input costs, staples, discretionary, etc). If you look at Consumer staples / health / hospitality sectors they are all speaking to higher input costs that can't be fully passed on due to demand destruction concerns. Even Amazon sales will eventually feel the effects.

Netflix raised prices but stock got hammered on guidance - Most recently FB. Consumers don't "HAVE TO" have every subscription/web service and as basic cost of living goes up through '22, I fully expect most Tech to slow (large or small cap).

My opinion hasn't changed yet on valuations and I haven't re-added to Tech positions I reduced in Nov/Dec... '22 will be a stock pickers market (especially in the US) to attempt out performance.

As to tie this back to Oil, I haven't sold any positions (not even swing trades) I took during '20/'21 and remain sector overweight, so I guess that expresses my sector/inflation bias at this point in the cycle, Winking Face
Last edited by DealRNothing on Feb 5th, 2022 2:40 pm, edited 1 time in total.
Sr. Member
Sep 28, 2011
640 posts
1052 upvotes
Winnipeg
DealRNothing wrote: As to tie this back to Oil, I haven't sold any positions I took during '20/'21 and remain sector overweight, so I guess that expresses my sector/inflation bias at this point in the cycle, Winking Face
Agree about oil. It'll be good until it's not, just like every cycle.
Deal Addict
Jul 30, 2012
1443 posts
1904 upvotes
bigblue1ca wrote: Agree about oil. It'll be good until it's not, just like every cycle.
Q to Q (daily) inflation data points to review for me... When I believed Inflation would be an issue (well over a year ago), few were speaking to it. Now that everyone's talking about it, that usually indicates one should be reviewing exit points, lol. I'm committed to inflation plays through Q1, but things will change with time and circumstance.

I'm assuming inflation comes off during 2H. Inflation effects usually take at least 12 months of pass thru.
Deal Fanatic
Aug 17, 2008
7385 posts
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via Reuters,
February 7:
PrairieSky Royalty Ltd: Expected Q4 earnings of 29 Canadian cents per share

February 8:
Cenovus Energy Inc: Expected Q4 earnings of 48 Canadian cents per share
Deal Fanatic
Aug 17, 2008
7385 posts
7581 upvotes
No bounce on this.

Canada's Crescent Point looks to sell some oil and gas assets -documents
FEBRUARY 7, 20221:16 PM

https://www.reuters.com/article/crescen ... SKBN2KC1Y0

(Reuters) - Canadian oil and gas producer Crescent Point Energy Corp is looking to sell some of its assets in Alberta and Saskatchewan that could fetch around C$500 million ($394 million), according to an industry source and marketing documents seen by Reuters on Monday.
Deal Addict
Jul 30, 2012
1443 posts
1904 upvotes
No, but WCP might take a minor hit, lol... ERF also looking to exit CAD assets so looks like some "opportunities" for GF.

WCP is looking for "tuck ins" and looks like some geography overlap. Price doesn't seem bad on the CPG packages at current (even $70) WTI (C$47K PPFB) but depends on the gas mix.
Deal Expert
Jan 27, 2006
19508 posts
12574 upvotes
Vancouver, BC
MrMom wrote: No bounce on this.

Canada's Crescent Point looks to sell some oil and gas assets -documents
FEBRUARY 7, 20221:16 PM

https://www.reuters.com/article/crescen ... SKBN2KC1Y0

(Reuters) - Canadian oil and gas producer Crescent Point Energy Corp is looking to sell some of its assets in Alberta and Saskatchewan that could fetch around C$500 million ($394 million), according to an industry source and marketing documents seen by Reuters on Monday.
I wonder what will happen if they do sell the land package for asking... At $500 million, that's just a bit more than 10% of its market cap which is a lot of extra money for a company that should be cash flowing positive in a big way right now.
Deal Fanatic
Aug 17, 2008
7385 posts
7581 upvotes
This has been out there all day, but will post it for anyone not aware.

Spanish oil major Repsol looking to sell parts of its Canadian assets
February 7, 202212:19 PM EST

https://www.reuters.com/world/americas/ ... 022-02-07/

Repsol is seeking buyers for its holdings in the Duvernay basin, in western Canada, which are still in early development stages, according to its website. The company's 170,000 acres (688 square kilometers) in the Duvernay could fetch about C$750 million ($589.9 million), according to an industry source.
Deal Fanatic
Aug 17, 2008
7385 posts
7581 upvotes
Cenovus (CVE) Q4 and FYE'21 ER. Full PR below.

https://www.cenovus.com/news/news-relea ... esults.pdf

Excerpt;

Calgary, Alberta (February 8, 2022) – Cenovus Energy Inc. (TSX: CVE) (NYSE: CVE) ... The company generated fourth-quarter cash from operating activities of $2.2 billion and adjusted funds flow of $1.9 billion. With free funds flow of $1.1 billion in the quarter, and proceeds from recent divestitures, net debt was below $9.6 billion at year end, a reduction of more than $1.4 billion from the end of the third quarter and $3.5 billion in 2021 following the acquisition of Husky Energy. Total long-term debt was $12.4 billion as at December 31, 2021, down nearly $1.7 billion from January 1, 2021, and expected to decrease by approximately US$384 million on February 9 when Cenovus redeems the remaining principal amount of its notes due in 2023 and 2024. As part of its plan to enhance shareholder returns, Cenovus continues to buy back common shares under its previously announced Normal Course Issuer Bid (NCIB) and as of February 7 had repurchased approximately 26 million common shares at a volume weighted price of $16.31 per share.

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Deal Expert
User avatar
Sep 19, 2004
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where I belong
CVE from BNN

CASH GUSHER SPREADS TO CENOVUS

Just like its peers, Cenovus Energy is raking it in thanks to the rally in energy prices. Free funds flow in the fourth quarter hit $1.1 billion, compared to just $91 million a year earlier. And the company chipped its long-term debt down to $12.385 billion. That’s not to say it was a spotless quarter. The company’s net loss more than doubled to $408 million thanks to a $1.9-billion impairment in its U.S. manufacturing division. Cenovus also said it ran into “operational challenges” at the Lima refinery it inherited in the Husky deal. We’ll pause here to point out that West Texas Intermediate crude has drifted below US$90 per barrel this morning.


CVE -7%
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Deal Guru
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Sep 21, 2007
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wow they're all free falling today...
"An essential aspect of creativity is not being afraid to fail." -- Edward Land
Deal Addict
Sep 2, 2004
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Energy names are killing it these days. Although CVE is down more than 8% today so I guess the market was expecting more. All CDN energy names are down as of this writing.

Side note - I'm not sure if the kids still say killing it but I am using it nevertheless.
Deal Guru
User avatar
Sep 21, 2007
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Capt. wrote: Energy names are killing it these days. Although CVE is down more than 8% today so I guess the market was expecting more. All CDN energy names are down as of this writing.

Side note - I'm not sure if the kids still say killing it but I am using it nevertheless.
There's way worse plays you could be in than these.
"An essential aspect of creativity is not being afraid to fail." -- Edward Land
Deal Fanatic
Apr 25, 2006
7269 posts
2219 upvotes
buy some inverse oil, DRIP, HOD.

Then you'll look back, man I am a genius shorting WTI / oil companies when oil is $90 bucks with re-opening already baked in and OPEC+ nations want a piece of the upside before WTI comes tumbling down as it always does.
"If you make a mistake but then change your ways, it is like never having made a mistake at all" - Confucius
Deal Fanatic
Aug 17, 2008
7385 posts
7581 upvotes
Capt. wrote: Energy names are killing it these days. Although CVE is down more than 8% today so I guess the market was expecting more. All CDN energy names are down as of this writing.

Side note - I'm not sure if the kids still say killing it but I am using it nevertheless.
Killing it +1, Getting killed -1

Texas Hedge: ES down on the possible Russian invasion of the Ukraine risk. CL down on peace risk. :facepalm:

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