Global Intel Hub -- 12/12/2022 #Inflation #USDollar #Currency #Oil What an amazing time for energy companies, especially in North and South America, away from the instabilities surrounding Europe and the Ukraine war, and all the collateral damage. Crediblock.com via our Second Sight Markets Intelligence & Analysis service has been covering energy stocks, such as Devon Energy $DVN W&T Offshore $WTI and others. The reason being is because we are in a unique inflation situation that is unprecedented. We have covered this in a recent ZH article:
Global markets are in a unique situation; the USD being the global reserve currency, issued sanctions on the world's largest energy producer. This caused 2 phenomenon in markets that usually happen as opposites (not together):
- Soaring USD Index, as real money flows drive the USD through the roof
- Domestic USD hyperinflation
Typically, as seen in extreme examples like in Turkey, inflation is connected to a falling currency because it becomes a game of hot potato. Banks offer high interest rates which only slightly overcome inflation, or don't (you end up getting 20% in the bank but inflation is 30%). Meanwhile, asset prices from stocks to real estate are down, in many cases seeking a bottom.
If that article isn't enough, checkout this one, and this. The point being that inflation is domestically out of control, yet the USD Index is smashing all time high records.
The FX trade here is obvious, go long USD and short non-USD pairs (buy on dips). The commodities trade is also fairly straightforward, buy Oil which you can do with Futures or $USO stock.
But what about Oil companies? If we were talking about Gold, everyone would be saying buy the miners. Why are so very few recommending to buy the refiners?
If you don't have exposure to US energy, we believe you should. No matter what happens with the war in Europe, US manufacturing of energy will be unimpeded.
What we are saying is that you can't go wrong allocating some of your portfolio to energy companies, and we feel that smaller more nimble companies may provide a better ROI because in the case of companies like Exxon $XOM they are good bets but they are so big. In the case of Vista Energy $VIST - from our SA article:
The market cap is $1.1 Billion, but that's also due to a 20% run up in the stock this year, which is slightly more than some of its peers. P/E ratio is $6, but considering the higher price that will affect P/E as well. The company is rapidly expanding, and their overall cost of operations are lower than their peers; not only because they are in Mexico, but it helps. For one, the results are fantastic. See for yourself, download the latest financial report: Q3 Financial Report.
Do your own research, or check our research service Second Sight Markets Intelligence & Analysis
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