During the stock market’s worst year since 2008, energy stocks have greatly outperformed other assets, providing strong returns as investors piled into the sector amid political and economic turmoil.
The best-performing stocks year-to-date on both the S&P and the Dow Jones Industrial Average are both energy companies, with Chevron’s 50% gain pacing the Dow and billionaire investor Warren Buffet’s favourite Occidental Petroleum’s 101% rally leading the S&P.
“Energy stocks are very, very cheap at what they’re currently earning,” Hunter Noble, portfolio manager of Hotchkis & Wiley’ Mid-Cap Value Fund, told Forbes earlier this month, citing energy companies’ leadership’s restraint to not “utilize all the cash flow to go out and develop additional resources.”
Russia, one of the world’s largest oil producers, invaded Ukraine in February, sending energy prices soaring globally and subsequently contributing to high inflation. Oil companies raked in record profits earlier this year thanks to high market prices but proved resilient as prices slid from their spring highs with investors’ confidence in the firms’ strong bottom lines.
Further Reading
These Were the Best Trades in 2022 (Bloomberg)
If Energy Stocks Are Undervalued, Is Now The Time To Buy? (Forbes)