Since the end of October, North American benchmark oil prices are up by nearly $10 a barrel, a percentage gain of 26 percent. And for once, energy stocks performed even better, with the S&P 500 Energy Index returning nearly 30 percent.
The Portfolio section highlights winners in our Model Portfolio and High Yield Energy List during a November when even the weakest scored percentage gains of close to 20 percent. And there’s every indication of a lot more to come in a sector we believe is shaping up for one of the fastest returns to favor in memory.
We’re taking advantage by adding some fresh picks to the Model Portfolio. See the Feature article for more on these stocks to buy now.
Certainly the positive news on the coronavirus vaccine front gets a great deal of credit for the rally. The S&P 500 had one of its biggest monthly rallies in recent history, surging more than 10 percent as economic gloom resulting from this year’s pandemic appeared to brighten. And not surprisingly, economically sensitive sectors like energy got an even bigger boost.
Producers and midstream companies face tougher environmental regulation starting next year, including more difficult permitting for new projects. But the moderate bent of former vice president Joe Biden’s closest advisors and closely split control of Congress—regardless of who wins the Georgia Senate runoffs—have greatly reduced the odds of disruptive policy changes for the energy industry. That includes a possible oil and gas drilling ban on federal lands, which despite the heated rhetoric of the campaign we continue to consider an extremely low probability event.
We expect energy stocks to continue to ride good news on vaccines and diminished political fears well into next year. But the most important reason for our bullishness is growing evidence we’ve already passed the inflection point in the current price cycle, both for oil the commodity and energy stocks.
Exhibit A is what’s been a steady flow of shareholder friendly M&A the past few months. Shares of both Concho Resources (NYSE: CXO) and its would-be acquirer ConocoPhillips (NYSE: COP), for example, are both up more than 20 percent since the deal was announced in mid-October.
Your complete guide to energy investing, from growth stocks to high-yielders.
In October 2012, renowned energy expert Elliott Gue launched the Energy & Income Advisor, a twice-monthly investment advisory that's dedicated to unearthing the most profitable opportunities in the sector, from growth stocks to high-yielding utilities, royalty trusts and master limited partnerships.
Elliott and Roger on Jun. 29, 2022
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