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Facing the largest supply shock in history, I find it very peculiar that people are reluctant to allocate to oil and gas companies.
I see a common theme where people see that the price of the stock has gone up and thus the move must already be over, or close to over, or too late.
In prior energy bull markets, the pure play oil and gas stocks had moves of 500-1500% The current move on most stocks is about 100% or less from the recent lows.
At the height of an energy bull market, the FCF ratio on the stocks condenses to around 4-5. While at the beginning it is usually higher 12-15. we are currently seeing the higher ratios.
When looking at the total energy market, the price has gone sideways for almost 20 years. it is just starting to break out of that range.
Last time it broke out of a range like that, there were structural changes to the oil price, moving the floor much higher. Making the prior range peak the new floor. In this case 148$ per barrel.
If this conflict ended today which is unlikely, there will be some interesting shifts in the way the world views energy. Every country will start a SPR, and there will be a built in premium to the price after the strait has proven to be a flashpoint.
If this war were to continue for some time, and the strait remain closed for longer, or more damage to oil and gas infrastructure in the area, then were looking at an even larger energy bull market than the prior one. Meaning stocks like OXY will not simply go up 500-1500% but more likely 1000-3000%
I guess my point is, that regardless of the length of war, almost all of these oil and gas companies are undervalued, especially if located in geopolitically safe regions (USA,CANADA)
when given the choice between an historically expensive stock market, vs a historically cheap energy company... the only real options are going cash or going oil and gas.
thanks. bye.
(EDIT) just read the comments. LOL you guys are allergic to money. the amount of people sidelined is insane. this is going so much higher, and just the sentiment alone would be enough evidence of that.