Five Oil Stocks to Buy Amid a Market Correction and Russia’s Threats
Five oil stocks to buy amid a market correction offer investors a way to profit during the new year. The new year is expected to produce a continued recovery in the energy sector on multiple levels led by a post-COVID demand rebound, according to…
Five oil stocks to buy amid a market correction offer investors a way to profit during the new year.
The new year is expected to produce a continued recovery in the energy sector on multiple levels led by a post-COVID demand rebound, according to a recent analysis by BofA Global Research. Four of the five oil stocks to buy amid a market correction feature U.S. oil companies that are significantly undervalued, BofA opined.
Environmental, social and governance (ESG) concerns weigh on many individual and institutional investors who seek to assign a value to clean energy, social consciousness and leadership, executive pay and shareholder rights. Traditional oil stocks are not meeting the ESG standards of certain investors who are rejecting the purchase of those stocks based on non-financial factors.
Five Oil Stocks to Buy Amid a Market Correction and ESG Fallout
The shunning of oil stocks by certain investors has led to a valuation mismatch with their true worth based on traditional financial metrics. BofA described the situation of the market assessing the value proposition of “old energy” stocks compared to a realistic pace of any transition to clean energy. In addition, many traditional oil stocks are boosting their free cash flow rather than focusing on growth as they might have done years ago.
“With what we see emerging as a reasonable long-term oil range of $60-80, we believe the sector can regain a 5% S&P 500 weight, positioning ‘old energy’ as relevant again in the eyes of investors,” BofA wrote.
As a result, the investment firm’s strategists are overweight in energy stocks. Oil prices currently are creeping above $85/bbl.
“Energy is the poster child for inflation protected yield, with the highest free cash flow yield and highest inflation beta of all sectors,” BofA commented.
Five Oil Stocks to Buy Amid a Market Correction and Saudi Effect
The favorable outlook for oil is strengthened by the idea that if not challenged for market share, Saudi Arabia has “de-facto control” of pricing for the commodity. BoA’s frame of reference is 1998, the last time Saudi Arabia exploited a demand crisis to its advantage.
In a post-COVID-19 world, BoA counseled that Saudi/Russian self-described “regulatory” actions to contain price volatility offer implicit support for the long-dated oil outlook.
“Our approach to valuation is different by design — defined by sustainable free cash, at a market-based cost of capital,” BofA wrote. The result could be “unprecedented” capacity to return cash to investors, with average sector free cash flow yield of 20% in 2022, the investment firm wrote.
ExxonMobil LeadsFive Oil Stocks to Buy Amid a Market Correction
Exxon Mobil Corporation (NYSE: XOM), a multinational oil and gas company headquartered in Irving, Texas, received a $100 price objective from BofA. Among the major oil companies, XOM ranks as the investment firm’s top pick.
The company’s management seems committed to returning cash instead of deleveraging, BofA wrote. With initial debt targets likely achieved in early 2022, a return to a competitive dividend could produce a 5x increase and still leave $3.5 billion of free cash, or 15% of its current market value, available for a share buyback, the investment firm added.
“Having navigated the collapse in oil prices with its dividend intact, XOM is the only major to emerge with a long list of organic growth opportunities poised for an inflection in free cash flow,” BofA wrote.
The top holding in theEnergy Select SPDR (XLE) exchange-traded fund is Exxon Mobil, said Bob Carlson, who leads the Retirement Watch investment newsletter. Carlson, who also serves as a pension fund chairman, added that energy stocks had a strong finish to 2021, and most of the factors that drove those gains continue in 2022.
Plus, inflation is likely to remain high for much of this year and perhaps longer, Carlson continued. Energy stocks traditionally are a good inflation hedge, he added.
Jim Woods, who leads investment advisory services, personally is recommending Exxon Mobil in the Income Multipliers portfolio of his Intelligence Report investment newsletter. Woods, who also heads the Successful Investing investment newsletter, as well as the Bullseye Stock Trader and High Velocity Options advisory services, produced a 56.9% return on his recommendation of XOM to his Intelligence Report subscribers in 2021.
Jim Woods and Paul Dykewicz discuss stocks to buy.
Five Oil Stocks to Buy Amid a Market Correction Include Chevron
Chevron Corp. (NYSE: CVX), a San Ramon, California-based multinational energy corporation, operates in more than 180 countries and is a buy recommendation of BofA. The investment firm’s $150 price objective, up from $140 previously, assumes an average of $60 Brent / $56.50 WTI.
BofA identified three key risks to the oil company achieving its price target. They are: (1) commodity price volatility, (2) operational execution, particularly on new projects, and (3) inability to capture the price environment due to cost pressures such as operating expenses, capital expenditures and taxation.
On the other hand, Chevron could top the investment firm’s price target, depending on other factors. The biggest two reasons for an outperformance likely would come from higher-than-expected oil prices and lower-than-projected capital expenditure spending, BofA added.
Suncor Joins Five Oil Stocks to Buy Amid a Market Correction
Suncor Energy Inc. (NYSE: SU), an integrated energy company based in Calgary, Alberta, specializes in production of synthetic crude from oil sands. SU received a buy recommendation from BofA and price objective of $34.
With a robust free cash flow outlook underpinned by a roll-off in major project spending and a sector low break-even of $35/bbl. WTI post-dividend, the oil company’s dividend coverage is expected to remain higher than its “big oil” peers. That situation sets the stages for leading cash return growth along with its dividend yield in the 5% range.
BofA recently reinstated coverage of Suncor with a buy recommendation. The investment firm now views Canada as advantaged compared to the U.S. exploration and production (E&P) businesses, marking a significant shift from perceptions just a few years ago, BofA wrote.
“In our view, capital discipline and a necessary pivot to cash returns over perpetual spending on unnecessary growth has leveled the playing field for what was previously seen as a short cycle ‘advantage’ for U.S. E&Ps versus the relatively stagnant production profile of oil sands,” BofA wrote. “Within our valuation framework, which defines value as a function of sustainable free cash flow, we see the relative advantage tipping towards Canada with capital efficiency helped by significant, legacy sunk costs and low sustaining capital.”
Occidental Jumps into Five Oil Stocks to Buy Amid Market Correction
Houston-based Occidental Petroleum Corp. (NYSE: OXY) is engaged in hydrocarbon exploration in the United States, the Middle East and Colombia, as well as petrochemical manufacturing in the United States, Canada and Chile. The stock received a $52 price objective from BofA Global Research, assuming the average of the base case of $60 Brent / $56.50 WTI.
Potential risks to OXY attaining its price objective are (1) the oil and gas price and margin environment, (2) significant delays to the new upstream projects critical to its production targets and (3) not seizing the price environment due to cost pressures of operating expenses, capital expenditures and taxation. On the other hand, the price target might be exceeded due to higher oil and gas prices than currently forecast.
OXY stands out for having one of the best free cash flows in the sector, BofA wrote.
Hess Lands Among Five Oil Stocks to Buy Amid Market Correction
Hess Corp. (NYSE: HES), a New York-based independent energy company engaged in the exploration and production of crude oil, obtained a $131 price objective and a buy rating from BofA. A new plus is that the company’s position in Guyana is transformational for business its size, BofA added.
With Liza Phase 2 in Guyana, the asset becomes self-funding and leading to a free cash flow inflection in share that will continue to expand with subsequent phases, BofA wrote. The stock remains undervalued at current levels, the investment firm continued.
BofA’s $131 price objective assumes oil prices of $60 Brent / $56.50 WTI. Risks to achieving the price objective are (1) the oil and gas price and margin environment, (2) significant delays to the new upstream projects critical to its growth targets, (3) inability to capture the price environment due to cost pressures and (4) negative news flow around the company’s exploratory and appraisal drilling activities.
Outperformance could occur if Hess is helped by higher oil and gas prices than forecast. Plus, after five years of talking about it, Guyana now will become operational for Hess, BofA wrote.
Expect short-term debt paid this year, the first dividend increase by Hess in eight years and “opportunistic” share buy backs, BofA wrote.
The Centers for Disease Control and Prevention (CDC) reported that the continuing threat of COVID-19 still is leading people to obtain boosters. But more than 60 million people in the United States, or nearly 15%, remain eligible for the vaccinations but have failed to obtain them, said Dr. Anthony Fauci, the chief White House medical adviser on COVID-19.
As of Jan. 26, 251,289,667 people, or 75.7% of the U.S. population, have received at least one dose of a COVID-19 vaccine, the CDC reported. Those who are fully vaccinated total 210,682,471, or 63.5% of the U.S. population, according to the CDC.
COVID-19 deaths worldwide, as of Jan. 26, topped the 5.6 million mark to hit 5,616,046, according to Johns Hopkins University. Worldwide COVID-19 cases have zoomed past 358 million, reaching 358,642,707.
U.S. COVID-19 cases, as of Jan. 26, topped 72 million, totaling 72,117,153 and causing 872,125 deaths. America has the dreaded distinction as the country with the most COVID-19 cases and deaths.
The five oil stocks to buy amid a market correction give investors a path to profit from the rising prices per barrel. People who can withstand the risk of contrarian investing compared to the trend for ESG consciousness could find their returns fueled by focusing on traditional financial fundamentals such as free cash flow.
Paul Dykewicz, www.pauldykewicz.com, is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, the Journal of Commerce, Seeking Alpha, GuruFocus and other publications and websites. Paul, who can be followed on Twitter @PaulDykewicz, is the editor of StockInvestor.com and DividendInvestor.com, a writer for both websites and a columnist. He further is editorial director of Eagle Financial Publications in Washington, D.C., where he edits monthly investment newsletters, time-sensitive trading alerts, free e-letters and other investment reports. Paul previously served as business editor of Baltimore’s Daily Record newspaper. Paul also is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. The book is great as a gift and is endorsed by Joe Montana, Joe Theismann, Ara Parseghian, “Rocket” Ismail, Reggie Brooks, Dick Vitale and many others. Call 202-677-4457 for multiple-book pricing.
Mathematicians use AI to identify emerging COVID-19 variants
Scientists at The Universities of Manchester and Oxford have developed an AI framework that can identify and track new and concerning COVID-19 variants…
Scientists at The Universities of Manchester and Oxford have developed an AI framework that can identify and track new and concerning COVID-19 variants and could help with other infections in the future.
Scientists at The Universities of Manchester and Oxford have developed an AI framework that can identify and track new and concerning COVID-19 variants and could help with other infections in the future.
The framework combines dimension reduction techniques and a new explainable clustering algorithm called CLASSIX, developed by mathematicians at The University of Manchester. This enables the quick identification of groups of viral genomes that might present a risk in the future from huge volumes of data.
The study, presented this week in the journal PNAS, could support traditional methods of tracking viral evolution, such as phylogenetic analysis, which currently require extensive manual curation.
Roberto Cahuantzi, a researcher at The University of Manchester and first and corresponding author of the paper, said: “Since the emergence of COVID-19, we have seen multiple waves of new variants, heightened transmissibility, evasion of immune responses, and increased severity of illness.
“Scientists are now intensifying efforts to pinpoint these worrying new variants, such as alpha, delta and omicron, at the earliest stages of their emergence. If we can find a way to do this quickly and efficiently, it will enable us to be more proactive in our response, such as tailored vaccine development and may even enable us to eliminate the variants before they become established.”
Like many other RNA viruses, COVID-19 has a high mutation rate and short time between generations meaning it evolves extremely rapidly. This means identifying new strains that are likely to be problematic in the future requires considerable effort.
Currently, there are almost 16 million sequences available on the GISAID database (the Global Initiative on Sharing All Influenza Data), which provides access to genomic data of influenza viruses.
Mapping the evolution and history of all COVID-19 genomes from this data is currently done using extremely large amounts of computer and human time.
The described method allows automation of such tasks. The researchers processed 5.7 million high-coverage sequences in only one to two days on a standard modern laptop; this would not be possible for existing methods, putting identification of concerning pathogen strains in the hands of more researchers due to reduced resource needs.
Thomas House, Professor of Mathematical Sciences at The University of Manchester, said: “The unprecedented amount of genetic data generated during the pandemic demands improvements to our methods to analyse it thoroughly. The data is continuing to grow rapidly but without showing a benefit to curating this data, there is a risk that it will be removed or deleted.
“We know that human expert time is limited, so our approach should not replace the work of humans all together but work alongside them to enable the job to be done much quicker and free our experts for other vital developments.”
The proposed method works by breaking down genetic sequences of the COVID-19 virus into smaller “words” (called 3-mers) represented as numbers by counting them. Then, it groups similar sequences together based on their word patterns using machine learning techniques.
Stefan Güttel, Professor of Applied Mathematics at the University of Manchester, said: “The clustering algorithm CLASSIX we developed is much less computationally demanding than traditional methods and is fully explainable, meaning that it provides textual and visual explanations of the computed clusters.”
Roberto Cahuantzi added: “Our analysis serves as a proof of concept, demonstrating the potential use of machine learning methods as an alert tool for the early discovery of emerging major variants without relying on the need to generate phylogenies.
“Whilst phylogenetics remains the ‘gold standard’ for understanding the viral ancestry, these machine learning methods can accommodate several orders of magnitude more sequences than the current phylogenetic methods and at a low computational cost.”
Journal
Proceedings of the National Academy of Sciences
DOI
10.1073/pnas.2317284121
Article Title
Unsupervised identification of significant lineages of SARS-CoV-2 through scalable machine learning methods
While the size of the United States makes it hard for it to compete with the inter-city train access available in places like Japan and many European countries, Amtrak trains are a very popular transportation option in certain pockets of the country — so much so that the country’s national railway company is expanding its Northeast Corridor by more than one million seats.
Running from Boston all the way south to Washington, D.C., the route is one of the most popular as it passes through the most densely populated part of the country and serves as a commuter train for those who need to go between East Coast cities such as New York and Philadelphia for business.
Veronika Bondarenko captured this photo of New York’s Moynihan Train Hall.
Veronika Bondarenko
Amtrak launches new routes, promises travelers ‘additional travel options’
Earlier this month, Amtrak announced that it was adding four additional Northeastern routes to its schedule — two more routes between New York’s Penn Station and Union Station in Washington, D.C. on the weekend, a new early-morning weekday route between New York and Philadelphia’s William H. Gray III 30th Street Station and a weekend route between Philadelphia and Boston’s South Station.
According to Amtrak, these additions will increase Northeast Corridor’s service by 20% on the weekdays and 10% on the weekends for a total of one million additional seats when counted by how many will ride the corridor over the year.
“More people are taking the train than ever before and we’re proud to offer our customers additional travel options when they ride with us on the Northeast Regional,” Amtrak Executive Vice President and Chief Commercial Officer Eliot Hamlisch said in a statement on the new routes. “The Northeast Regional gets you where you want to go comfortably, conveniently and sustainably as you breeze past traffic on I-95 for a more enjoyable travel experience.”
Here are some of the other Amtrak changes you can expect to see
Amtrak also said that, in the 2023 financial year, the Northeast Corridor had nearly 9.2 million riders — 8% more than it had pre-pandemic and a 29% increase from 2022. The higher demand, particularly during both off-peak hours and the time when many business travelers use to get to work, is pushing Amtrak to invest into this corridor in particular.
To reach more customers, Amtrak has also made several changes to both its routes and pricing system. In the fall of 2023, it introduced a type of new “Night Owl Fare” — if traveling during very late or very early hours, one can go between cities like New York and Philadelphia or Philadelphia and Washington. D.C. for $5 to $15.
As travel on the same routes during peak hours can reach as much as $300, this was a deliberate move to reach those who have the flexibility of time and might have otherwise preferred more affordable methods of transportation such as the bus. After seeing strong uptake, Amtrak added this type of fare to more Boston routes.
The largest distances, such as the ones between Boston and New York or New York and Washington, are available at the lowest rate for $20.
I am a conservation biologist who studies emerging infectious diseases. When people ask me what I think the next pandemic will be I often say that we are in the midst of one – it’s just afflicting a great many species more than ours.
I am referring to the highly pathogenic strain of avian influenza H5N1 (HPAI H5N1), otherwise known as bird flu, which has killed millions of birds and unknown numbers of mammals, particularly during the past three years.
This is the strain that emerged in domestic geese in China in 1997 and quickly jumped to humans in south-east Asia with a mortality rate of around 40-50%. My research group encountered the virus when it killed a mammal, an endangered Owston’s palm civet, in a captive breeding programme in Cuc Phuong National Park Vietnam in 2005.
How these animals caught bird flu was never confirmed. Their diet is mainly earthworms, so they had not been infected by eating diseased poultry like many captive tigers in the region.
This discovery prompted us to collate all confirmed reports of fatal infection with bird flu to assess just how broad a threat to wildlife this virus might pose.
This is how a newly discovered virus in Chinese poultry came to threaten so much of the world’s biodiversity.
Until December 2005, most confirmed infections had been found in a few zoos and rescue centres in Thailand and Cambodia. Our analysis in 2006 showed that nearly half (48%) of all the different groups of birds (known to taxonomists as “orders”) contained a species in which a fatal infection of bird flu had been reported. These 13 orders comprised 84% of all bird species.
We reasoned 20 years ago that the strains of H5N1 circulating were probably highly pathogenic to all bird orders. We also showed that the list of confirmed infected species included those that were globally threatened and that important habitats, such as Vietnam’s Mekong delta, lay close to reported poultry outbreaks.
Mammals known to be susceptible to bird flu during the early 2000s included primates, rodents, pigs and rabbits. Large carnivores such as Bengal tigers and clouded leopards were reported to have been killed, as well as domestic cats.
Our 2006 paper showed the ease with which this virus crossed species barriers and suggested it might one day produce a pandemic-scale threat to global biodiversity.
In the past couple of years, bird flu has spread rapidly across Europe and infiltrated North and South America, killing millions of poultry and a variety of bird and mammal species. A recent paper found that 26 countries have reported at least 48 mammal species that have died from the virus since 2020, when the latest increase in reported infections started.
Not even the ocean is safe. Since 2020, 13 species of aquatic mammal have succumbed, including American sea lions, porpoises and dolphins, often dying in their thousands in South America. A wide range of scavenging and predatory mammals that live on land are now also confirmed to be susceptible, including mountain lions, lynx, brown, black and polar bears.
The UK alone has lost over 75% of its great skuas and seen a 25% decline in northern gannets. Recent declines in sandwich terns (35%) and common terns (42%) were also largely driven by the virus.
Scientists haven’t managed to completely sequence the virus in all affected species. Research and continuous surveillance could tell us how adaptable it ultimately becomes, and whether it can jump to even more species. We know it can already infect humans – one or more genetic mutations may make it more infectious.
At the crossroads
Between January 1 2003 and December 21 2023, 882 cases of human infection with the H5N1 virus were reported from 23 countries, of which 461 (52%) were fatal.
Of these fatal cases, more than half were in Vietnam, China, Cambodia and Laos. Poultry-to-human infections were first recorded in Cambodia in December 2003. Intermittent cases were reported until 2014, followed by a gap until 2023, yielding 41 deaths from 64 cases. The subtype of H5N1 virus responsible has been detected in poultry in Cambodia since 2014. In the early 2000s, the H5N1 virus circulating had a high human mortality rate, so it is worrying that we are now starting to see people dying after contact with poultry again.
It’s not just H5 subtypes of bird flu that concern humans. The H10N1 virus was originally isolated from wild birds in South Korea, but has also been reported in samples from China and Mongolia.
Recent research found that these particular virus subtypes may be able to jump to humans after they were found to be pathogenic in laboratory mice and ferrets. The first person who was confirmed to be infected with H10N5 died in China on January 27 2024, but this patient was also suffering from seasonal flu (H3N2). They had been exposed to live poultry which also tested positive for H10N5.
Species already threatened with extinction are among those which have died due to bird flu in the past three years. The first deaths from the virus in mainland Antarctica have just been confirmed in skuas, highlighting a looming threat to penguin colonies whose eggs and chicks skuas prey on. Humboldt penguins have already been killed by the virus in Chile.
How can we stem this tsunami of H5N1 and other avian influenzas? Completely overhaul poultry production on a global scale. Make farms self-sufficient in rearing eggs and chicks instead of exporting them internationally. The trend towards megafarms containing over a million birds must be stopped in its tracks.
To prevent the worst outcomes for this virus, we must revisit its primary source: the incubator of intensive poultry farms.
Diana Bell does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.
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