For Investors Only -- October 24, 2022

Abbreviated disclaimer: this is not an investment site.  Do not make any investment, financial, job, career, travel, or relationship decisions based on what you read here or think you may have read here. Full disclaimer at tabbed link.

All my posts are done quickly: there will be content and typographical errors. If anything on any of my posts is important to you, go to the source. If/when I find typographical / content errors, I will correct them.

Synthetic monopolies: link here.

• fourteen sectors / categories --
• AAPL in three of them; should be part of a fourth (cloud-base layer)
• possibly a fifth: payments, along with V, MA
• and, definitely in a sixth sector / category: semiconductors
  
• UNP -- this one is most obvious; has been that way for decades
• semiconductors: if there are numerous "monopolies" within this group, can they be monopolies -- ask INTC

Open-book test, link here:

• ignore the politics
• look at the PFE, MRNA headlines

US fuel demand has surpassed 2019 levels -- Valero -- link here.

Oil -- Bloomberg Opinion; 

The biggest impediment to energy stocks these past few years has been contempt. Investors hated the sector’s talent for burning cash, feared its ever-darkening climate outlook and wearied of the queasy ups-and-downs of oil itself. Analysts at Tudor, Pickering, Holt & Co. captured all that, perhaps unintentionally, in an update this week: “It seems to be getting more difficult for the generalist community to ignore the sector at large.”

Becoming seemingly less ignorable might not look like a ringing endorsement. But this is a sector that, despite producing the world’s most indispensable commodity, dropped to less than 2% of the S&P 500 two years ago. That was amid the pandemic, granted, but Covid-19 merely delivered the coup de grace after years of decline. So money managers feeling the need for energy exposure again is a big deal.

Since March 2020, oil prices have roughly quadrupled, pulling energy equities up with them. Yet, despite the sector having trounced the broader market this year, its average valuation multiples are roughly where they were back at the start of the pandemic, at about 4.5 to 5.5 times forward Ebitda. The cash flows are much bigger; energy’s weighting is back above 5%. But the level of trust and interest, as expressed by those multiples, remains muted. Changing that, and expanding those valuations, could add another leg to the rally.

There are similarities to the setup in the early 2000s, says Ben Dell of Kimmeridge Energy Management Co., with the sector coming off years of underinvestment and with supply tight. As back then, rising interest rates spur fears of recession but that may curb demand growth rather than cut it outright.

The big difference is the energy transition, with clean technologies transformed and structural changes like US climate legislation squeezing the terminal valuations embedded in energy stocks. Yet the years needed to turn over chunks of the energy system, such as vehicle fleets, and the immediate exigencies of energy security may portend another near-term upcycle. 

Strong results from oilfield services bellwether Schlumberger Ltd. fit this view. At the least, as energy inflation corrodes the rest of their portfolio, many investors may feel compelled to buy back into the sector they love to hate. 

                                                                                 -- Liam Denning, Bloomberg Opinion

Tesla permabulls in full panic mode: link here.

• robotaxis rolling off the GM production line; flooding San Francisco streets

Dividends, more of the same, nothing new, gets tedious, link here:

• notes:
• list needs to include TYS, DE, and AAPL - per reader;
• NextEra Energy just announced increase in quarrterly dividend.