The Market Put a Premium on Large Caps with Strong Margin Growth
Large-cap energy stocks with above-average margin growth mostly outperformed peers last week.
The Energy Select Sector SPDR Fund (XLE) is primarily composed of large-cap stocks.
The rise in price-to-earnings ratios is indicative of investor preference towards storage during contango oil and gas markets.
Fund flows into the Energy Select Sector SPDR Fund (XLE) have turned into a new outflow towards the end of May 2015.
Notably, Goldman Sachs (GS) has massively lowered its holdings in XLE from 21 million shares in 4Q14 to 8 million shares in 1Q15.
The Greek debt crisis is causing the US dollar to appreciate, making investors holding other currencies perceive the commodity to be more expensive.
Energy sector ETFs have posted returns that largely lag behind the returns of the benchmarks in the sector.
Hedge fund indices in the energy sector offered mixed performances last week.
Vaalco Energy’s (EGY) revenues declined to $18.2 million in 1Q15, from $28.1 million in 1Q14. This translated to a diluted net loss per share of $0.67, down from $0.12 per share in 1Q14.
SandRidge’s proved resources for 2014 rose 37% to 516 MMBOE (million barrels of oil equivalent). They were estimated to be $5.5 billion.
The US rig count fell by 40% compared to a year ago, but 9.6 million bpd were still pumped in the United States, the highest since 1970. Hedging by oil companies has helped.
China is one of the largest consumers of oil in the world. Its economic growth is vital for a boost in the global demand for oil. PMI came in at 49.2 in May, below the critical value of 50.
Crude oil prices are feeling the pressure as the US dollar rises and expectations linger over whether oil production will stay high with OPEC. This is a reason to worry about oversupply.
Smithwood Advisers was among the hedge funds that sold their stakes in SandRidge Energy in 1Q15. Hancock Holding was one of the firms that sold stakes in Vaalco Energy.
With Halliburton’s business being significantly geared toward unconventional plays, there is a risk of higher setbacks to its deep-water projects, such those in the Gulf of Mexico.
Halliburton cut close to 10% of its workforce over the most recent two quarters and has plans to lay off more employees in the near future.
The rising strength of the US dollar is pressuring oil prices, making it expensive for global investors to purchase oil-based securities priced in dollars.
Och–Ziff Capital Management either reduced or sold its stakes held in energy companies, amounting to at least $314 million.
Microsoft says cloud computing will remain the focal point of its strategy going forward. MSFT’s commercial segment’s revenue grew by 5% YoY.
From a portfolio management perspective, an allocation into Microsoft by ValueAct Holdings is inherently a bet that MSFT will outperform some key benchmarks.
But if I knew how to manage my portfolio safer and smarter than most hedge fund managers, I could realistically grow my wealth.