Energy Sector Analysis Overview
Market performance and trends in the energy sector analyzed by Yimeng Hu, Michael Jing, and Steve Klein. The sector's market cap, industries, companies, and financial metrics are evaluated along with supply chain dynamics and economic factors affecting the oil and energy industry. Recommendations for portfolio weighting towards energy assets are provided based on research findings.
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Presentation Transcript
Energy By Yimeng Hu, Michael Jing, and Steve Klein
Overview Size of the sector Market Cap: $3.51T Market Weight: 4.22% Industries Energy Equipment and Services Oil, Gas, and Consumable Fuels Companies Performance YTD: 29.4% 90 day: -5.22% Saudi Aramco ExxonMobil Chevron Corporation Shell Total Energies NextEra Energy ConocoPhillips
Business Analysis -Supply Chain analysis: Decreasing demand due to global environmental policies and increasing supply due to development of technologies. -Oil & Energy has cyclical pattern, and the major output are from Zimbabwe, USA and Russia. The demand was drive by overall world usage, and the performance were largely impacted by systematic risk. https://www.commoditiesdemystified.info/ en/global-supply-chain.html https://en.wikipedia.org/wiki/Petroleum_industry#/media/File :Oil_Reserves.png
Economic Analysis -Oil & Energy related sector is a major economic input, which means we can anticipate the future Oil & Energy trend from inflation rate by major countries. -Overall similar pattern between Oil price and Inflation were found on right graph, but also seen significant discrepancy due to other factors (eg. war, climate change, environmental policy ect.) Source: https://www.economicshelp.org/blog/167245/economics/the- relationship-between-oil-prices-and-inflation/
Financial Analysis -Main companies in S & P 500: Consensus in red columns -The growth rates are very fluctuated in the past 5 years, however we predict high growth rate in 2022 and 2023, thanks to the high oil prices.
Valuation Analysis Listed above are the financial metrics for the Energy sector. Above, the Energy sector metrics are compared to the SP500 metrics.
Valuation contd. 1 year chart of XLE
Recommendation The SIM portfolio should be overweight energy Positives of our recommendation Largest YTD increase Negatives Susceptible to influence by government Which industry should be overweight? Oil, Gas, and Consumable Fuels Accounts for about 94% of energy sector
