- Energy was the best performing sector in January, up 19% over all other sectors that were down.
- RBC analysts believe we are still in the early stages of a robust, multi-year oil super cycle.
- They share a list of the 19 best energy stocks to buy, which has returned 86.8% since the start of 2013.
The energy market started the new year strong, jumping 19% in a volatile market in January, while all other S&P 500 sectors ended the month in the red.
The sector’s outperformance closely followed the rebound in energy consumption as governments around the world eased restrictions amid the pandemic. In a sign of the times, the iShares Oil & Gas Exploration & Production ETF has soared 94% over the past year.
Going forward, the sector is expected to be supercharged by the combination of rising inflation, geopolitical tensions, as well as a growing imbalance between supply and demand.
Oil prices hit a seven-year high on Monday as Brent crude, the global benchmark, crossed $90 a barrel for the first time since 2014. Prices then fell after the Organization of the Petroleum Exporting Countries said it would increase production by 400,000 barrels per day. in March.
Companies in the energy sector, which have been hit hard by the pandemic, are also reporting increased revenues and profits. Exxon Mobil (XOM), which lost $22.4 billion in 2020, made a massive turnaround as annual profits hit $23 billion last year. Chevron (CVX) posted its most profitable year since 2014, with net income of $15.6 billion last year. Similar gains are expected for European oil giants like Shell and BP, according to the Wall Street Journal.
We are already “in the early stages of a strong, multi-year oil cycle,” RBC’s Michael Tran, Helima Croft and Christopher Louney wrote in a Jan. 26 note, echoing sentiments from other analysts.
“We continue to believe that this year is shaping up to be one of the few parts of the cycle that is not exclusively supply-driven or exclusively demand-driven, as many cycles are. announcement to be led by both strengthening demand and tightening.” supply, simultaneously,” they said. “Such a dynamic hasn’t existed, on a sustained basis, for over a decade. That’s the definition of a supercycle.”
To capture the growth of the supercycle, RBC updated its list of the best global energy ideas on Tuesday. The list of 20 stocks rose 11.2% in January compared to the iShares S&P Global Energy Sector ETF (IXC) return of 16.5% and a hybrid benchmark ( 75% IXC plus 25% iShares Global Utilities ETF).
Since its launch in February 2013, the list is up 86.8% compared to the S&P Global Energy Sector ETF, which has gained 4.8% in the meantime, according to the bank.
The 19 titles are presented below. (One of the 20 stocks – Tamarack Valley Energy – was not included as its inclusion in the list had not been reviewed or confirmed as of the publication date, the bank said.)