Once upon a time, Big Tech stocks were all the rage on Wall Street, with investors pricing them to crazy heights. Namely, the famous quintuple of Facebook (now Meta), Amazon, Apple, Netflix and Google (now Alphabet) represented at one time nearly one-fifth of S&P500— a staggering number considering that the S&P 500 is generally considered an indicator of the US economy as a whole. In stark contrast, investors shunned the oil and gas sector thanks to years of low shareholder returns, rising debt and declining profits.
But now the tables have turned, with the once-ascent Nasdaq plunging while oil stocks have become the new FAANG: the Technology Select Sector SPDR ETF (NYSEARCA:XLK) has fallen 24.3% since the start of the year, while its energy counterpart, Energy Select Sector SPDR ETF (NYSEARCA:XLE) up 35.9% over the period. Thursday, Japan Software bank— the epitome of the excesses that fueled the tech stock boom — posted a loss of about 1.71 trillion yen, the equivalent of $13.2 billion, for the fiscal year ending March. This marked the biggest loss ever in its four decades of existence for the largest technology investor in the world.
But investors in the energy sector couldn’t be happier, with the oil rush fueling record profits.
“Given soaring oil and gas prices this year, no one will likely be surprised that the energy sector posted the strongest profit growth in the first quarter,Wade Fowler, senior portfolio manager at Synovus Trust Company, told CNBC.
Energy stocks currently make up just 4.4% of the S&P 500, a far cry from the 28% slice of the technology market. Fowler says energy stocks have plenty of room to catch up with technology, “We’re not suggesting that energy is about to come back in line with technology like it did in the mid-2000s when commodities surged after the Dot Com crash, but that’s not. is certainly not impossible either” said the Bespoke analyst.
Indeed, for the first time, the most valuable company in the world is an energy company: the market value of Saudi Arabia, the world’s largest oil company, overtook US-based Apple, making the Saudi oil giant the world’s most valuable company. It came after the company’s shares soared 46.20 riyals, taking the market value to $2.464 trillion (9.24 trillion riyals), while Apple was valued at $2.461 trillion.
But it’s not all smooth sailing for oil’s return to the top. The volatility is incredible, and the nearly 10% decline in the sector on Monday means there is a warm group of short sellers betting against the industry.
Companies with less than 2% open float include Equinor ASA (NYSE: EQNR), Shell PLC (NYSE: SHEL), TotalEnergies (NYSE: TTE), BP inc. (NYSE:BP), ExxonMobil Corporation (NYSE: XOM), EOG Resources (NYSE: EOG), Chevron (NYSE: CVX), and Conoco Phillips (NYSE:COP).
For investors looking for bargains, Simon Wong, an analyst at Gabelli Funds in New York, tapped Whiting Petroleum Corp.(NYSE: WLL), Valaris SA (NYSE:VAL), and Tidewater Inc. (NYSE:TDW) as being heavily discounted now. All three emerged from pandemic-induced bankruptcies.
Here are 5 of the most heavily shorted energy stocks, meaning investors should exercise caution when buying them.
- CNX Resource Company
Market cap: $3.6 billion
Short-term interest: 14.3%
Cumulative returns since the beginning of the year: 34.1%
CNX Resource Company (NYSE: CNX) is an independent natural gas and midstream company that acquires, explores, develops and produces natural gas properties in the Appalachian Basin.
The Company operates in two segments, Shale and Coalbed Methane. It produces and sells pipeline-grade natural gas primarily for gas wholesalers. The company has rights to extract natural gas in Pennsylvania, West Virginia and Ohio from approximately 526,000 net acres of Marcellus shale; and approximately 610,000 net acres of Utica shales, as well as rights to extract natural gas from other shale and shallow oil and gas positions of approximately 1,006,000 net acres in Illinois, l ‘Indiana, New York, Ohio, Pennsylvania, Virginia, and West Virginia. It also holds coal bed methane (CBM) mining rights in Virginia to approximately 282,000 net CBM acres in central Appalachia, as well as 1,733,000 net CBM acres in West Virginia, Pennsylvania, Ohio. , Illinois, Indiana and New Mexico.
- Callon Petroleum Company,
Market cap: $2.8 billion
Short-term interest: 14.2%
Cumulative returns since the beginning of the year: -16.6%
Callon Oil Company (NYSE: CPE) is an independent oil and gas company based in Houston, Texas, focused on the acquisition, exploration and development of oil and gas properties in the Permian Basin, West Texas.
As of December 31, 2021, its estimated net proved reserves totaled approximately 484.6 million barrels of oil equivalent, including 290.3 Mbbl of oil, 577.3 Bcf of natural gas and 98.1 Mbbl of natural gas liquids. The company was founded in 1950 and is based in Houston, Texas.
Market cap: $3.5 billion
Short-term interest: 13.9%
Cumulative returns since the beginning of the year: 71.2
Based in Frisco, Texas, Comstock Resources, Inc.(NYSE: CRK), an independent energy company, is engaged in the acquisition, exploration, development and production of oil and natural gas primarily in northern Louisiana and eastern Texas, USA. United.
As of December 31, 2021, the company had 6.1 trillion cubic feet of natural gas equivalent of proven reserves. It also holds interests in 2,557 oil and natural gas production wells.
- Chesapeake Energy Corporation
Market cap: $10.8 billion
Short-term interest: 13.3%
Cumulative returns since the beginning of the year: 27.4%
Based in Oklahoma City, Oklahoma, Chesapeake Energy Corporation(NASDAQ:CHK) is an independent exploration and production company that engages in the acquisition, exploration and development of properties for the production of oil, natural gas and natural gas liquids from underground reservoirs in the United States.
The Company has interests in natural gas resource plays in the Marcellus Shale in the northern Appalachian Basin in Pennsylvania and the Haynesville/Bossier Shale in northwest Louisiana; and the liquids-rich resource play in the Eagle Ford Shale in southern Texas. As of December 31, 2021, it held interests in approximately 8,200 gross producing wells, including 6,500 working interest wells and 1,700 controlling interest or royalty wells; and had proven reserves estimated at 661 million barrels of oil equivalent. The company was founded in 1989 and is based in Oklahoma City, Oklahoma.
Market cap: $9.6 billion
Short-term interest: 13.0%
Cumulative returns since the beginning of the year: -51.6%
Power socket inc. (NASDAQ:PLUG) is a Latham, New York-based energy company that provides turnkey hydrogen fuel cell solutions for the mobility, material handling and stationary energy markets in North America. North and internationally. It focuses on fuel cell and proton exchange membrane (PEM) fuel processing technologies, and hybrid fuel cell/battery technologies, as well as related infrastructure for the production, storage and distribution of hydrogen and green hydrogen.
The company offers GenDrive, a hydrogen-powered PEM fuel cell system that powers electric material handling vehicles and GenFuel, a liquid hydrogen delivery, generation, storage and distribution system.
Plug Power offers its products to retail distribution and manufacturing companies through a direct product sales force, original equipment manufacturers and dealer networks. It has a strategic partnership with Airbus SE to decarbonize air travel and airport operations with green hydrogen; and Fortescue Future Industries to manufacture electrolyser technology in Australia.
By Alex Kimani for Oilprice.com
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