The speaker discusses the current state of the S&P 500, which is on track for its seventh straight positive session. This is largely due to Saudi Arabia's decision to extend its oil cuts through the end of the year. The speaker suggests that the oil sector is waking up and that investors should be prepared to accept more risk if they are looking to invest in energy equity names.
The speaker provides an example of this risk by comparing the spot price of oil, which is up 22% so far this quarter, to the performance of the XLE, a sector-specific ETF that tracks the energy sector. The XLE is up 12%, suggesting that investors may not get the same returns from energy equities as they would from the spot price of oil.
The speaker suggests that investors should look towards companies that have been underperforming while crude oil has been in a sideways range and have a higher sensitivity to the spot price of oil. These companies would see an accretive impact on their revenues if oil prices rally. Examples of such companies include Exxon Mobil and Chevron.
The speaker also suggests that investors should be more biased towards domestic names and small and mid-cap companies, as these are the names that have the most potential to go up if oil prices increase. The speaker also mentions that they are in the Midstream space, including Enterprise Products, Energy Transfer, Kinder Morgan, and Williams.
The speaker concludes by stating that there is an interesting point where investors can play both domestic and international, and that this can be a great way to play. They also mention that companies domiciled overseas are trading at almost half the multiple of their U.S counterparts, which can be a great way to play.
1. The S&P 500 is experiencing its seventh straight positive session.
2. The gains today are coming after Saudi Arabia extended its oil cuts through the end of the year.
3. Oil has had its eighth straight day of gains.
4. The spot price of oil is up 22% quarter to date.
5. The XLE is up 12%.
6. If you're investing in energy through Exxon Mobil or Chevron, you're going to have to accept a higher beta exposure to capture the breakout in the spot price.
7. Companies that have been underperforming while crude has been in a sideways range and have a higher sensitivity to the spot price of oil rallying are expected to have an accretive impact on their revenues.
8. Companies like Exxon Mobil and Chevron are more diversified, so a more significant move in the spot price of oil up or down is not going to have the same impact as these high beta names.
9. If you're looking at the spot price of oil and think you're going to get the same 20% that spot oil is giving you, you have to accept more risk and go higher beta in your energy exposure.
10. If you're a bull on energy, it's time to stop jumping out of the basement window with a parachute.
11. If you actually want to make something on this trade, you're going to have to scale down in market cap and scale up in beta or risk volatility.
12. You want to be more biased toward domestic names and more biased towards small and mid cap because those are the names that really have the most to go up.
13. The speaker is in IEO and has been in this for a while.
14. The speaker's portfolio of all of the non-majors includes some big companies.
15. The speaker's portfolio is paying less than 10 times forward earnings for the portfolio.
16. The speaker's portfolio is getting a forward dividend yield forecasted of six and a quarter percent.
17. The speaker's portfolio is expected to get a high beta trade as Energy prices go higher and people try to buy the stocks to capitalize.
18. The speaker's portfolio is expected to take the level out to the upside and this will be a bona fide technical breakout.
19. The speaker's energy is in the Midstream space so Enterprise Products, Energy Transfer, Kinder Morgan, Williams.
20. The speaker's International income strategy includes Total and Shell.
21. The speaker's International play is expected to be cheaper than the US majors.
22. The speaker's International play is expected to be cheaper than the US majors because they're almost held overseas.
23. The speaker's International play is expected to be cheaper than the US majors because they're domiciled in governments that are hostile to profitability.
24. The speaker's International play is expected to be cheaper than the US majors because the valuation differential is too wide for right now.
25. The speaker's International play is expected to be cheaper than the US majors and they have huge juicy