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  • Roger S. Conrad

The Earnings Issue

By Elliott H. Gue on May. 20, 2022

The Nasdaq 100 has lost about -27 percent of its value so far this year. And the almost as technology-stock heavy S&P 500 isn’t far behind at roughly -18 percent. Throw in the collapse of the bond market—led by a near doubling of the benchmark 10-year Treasury bond yield—and it’s small wonder so many have already proclaimed a bear market is underway.

We won’t argue stocks aren’t due for one, given the last period that really qualified was back in 2007-09. And the worst inflation rate in over 40 years, China’s pandemic lockdowns, the increasingly hawkish Federal Reserve, fallout from Russia’s Ukraine invasion and signs consumer spending is slowing are certainly reasons for worry.

Equally, however, 2022 so far has been among the best of times for energy investors. Led by continuing gains in best in class oil and gas stocks, the S&P Energy Sector Index has returned better than 48 percent. And even sector laggards are revving their engines, with the Philadelphia Stock Exchange Oil Service Sector Index (OSX) higher by nearly 42 percent and the midstream laden Alerian MLP Index returning more than 20 percent.

We believe the best by far is yet to come. The two most important takeaways from sector Q1 earnings reports and guidance updates are (1) all of our recommended companies are in the pink of health and advancing strategic growth goals and (2) management is still keeping a tight leash on investment in new oil and gas production and related infrastructure.

The investment deficit means the long-term trend in supply will continue to lag demand in coming years. That means the value of existing oil and gas reserves as well as midstream and downstream infrastructure will rise and commodity prices stay higher for longer. And our companies’ underlying strength as businesses means we can hold them with confidence they’ll reward us with superior income, capital gains and the occasional windfall from a takeover.

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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.

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    • Elliott H. Gue

      Founder and Chief Analyst: Capitalist Times and Energy & Income Advisor

    • Roger S. Conrad

      Founder and Chief Analyst: Capitalist Times and Energy & Income Advisor