Buffett and BlackRock find energy stocks irresistible in turbulent times

  • Energy stocks are becoming favorites of Wall Street elites, even as the recent spate of bank failures has spooked markets.
  • Warren Buffett’s Berkshire Hathaway has spent nearly $500 million on Occidental Petroleum stock in just three days.
  • BlackRock and Goldman Sachs also touted their preference for energy stocks.

The worst bank failures since 2008 sent shockwaves through markets this month, but that didn’t stop some of Wall Street’s biggest names from piling up in pockets of equity value.

And a sector is becoming the favorite with people like Berkshire Hathaway, black rock And Goldman Sachs – energy values.

Warren Buffett’s investment firm invested in western oil last year’s best-performing stock in the S&P 500 index, resuming buying in recent weeks after a five-month hiatus. Berkshire paid over $11 billion in the business in just over 12 months, with the latest purchases of $467 million reported this week. He also invested about $20 billion in Chevron last year.

BlackRock, the world’s largest fund manager, favors energy stocks on the prospect that oil and gas prices could rise this year amid supply constraints, strategists led by Wei Li wrote in a note. released this week. The firm also favors healthcare stocks for their “downturn defensive characteristics” and financials because they tend to benefit from higher interest rates.

Goldman Sachs’ chief U.S. equity strategist, David Kostin, said last month that he was it’s time to look to value stocks from sectors like energy and health care. Most recently, the US bank upgraded European oil and gas giant Shell to a buy rating in February, forecasting stock gains of up to 40%.

“Rates are going up, and so we’re looking for value. That’s going to be the strategy and the playbook for this year,” Kostin told Bloomberg TV at the time, referring to Reserve interest rate increases. federal over the past year. .

“There is a much larger share of earnings that comes from energy relative to its weight in the market. Like 10% of earnings in the market and maybe 5% of market capitalization, so that suggests that the profits will likely be much higher there,” he added.

Buffett likes Occidental for its national footprint and the fact that it pays down debt, distributes dividends and buys back stock, said oil company CEO Vicki Hollub. said. Berkshire got the approval regulators in August to increase its Western stake to 50%, signaling that they are not done building their stake.

Buffett’s company stuck to its bullish approach to energy stocks this month, while BlackRock also reiterated its preference for the sector despite falling oil prices. Crude prices have fallen in recent weeks on fears that collapsing US banks could trigger an economic crisis that would undermine energy demand.

The price of West Texas Intermediate crude, the US benchmark, fell below $70 a barrel this week to lows not seen since 2021. The S&P 500 Energy Index of sector stocks is down about 12% to now this year, after advances of 59% and 48%. % in 2022 and 2021, respectively.

The current fight financial market turmoil stems from a series of bank meltdowns over the past week. Silicon Valley Bank Folded last Friday in the second largest collapse in history. This happened just days after the closure of Silvergate Capital and was quickly followed by the closure of Signature Bank.

Economic uncertainty fueled by the banking turmoil led to a spike in volatility in the oil market. The CBOE Crude Oil Volatility Index is on track for the biggest weekly increase in over a year.

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