It’s hard to believe that even after dramatically outperforming the broad stock market for almost two years now, energy stocks still trade at a massive discount.
'Energy stocks make up just 4% of the S&P 500 but are expected to account for 12% of its earnings in the second quarter. Major oil producers are trading at a 65% discount to the market, wider than nearly any time in the past decade.' https://t.co/JVXcCAznmX
— Jesse Felder (@jessefelder) July 23, 2022
In that context, however, it’s not hard to understand why executives in the sector have been, and still remain, such avid buyers of their own shares.
— Variant Perception (@VrntPerception) August 2, 2022
They’re simply doing what Warren Buffett famously recommended by getting greedy as retail investors once again get fearful.
largest outflow ever from materials (and record 3-week outflow from resources – which is energy & materials stocks) pic.twitter.com/P1cgCq2Me5
— Mike Zaccardi, CFA, CMT (@MikeZaccardi) July 8, 2022
Of course, Mr. Buffett, himself, is demonstrating how he puts his famous saying into practice.
'Since mid-June, Berkshire has purchased about 20 million shares. Buffett seems to like buying Occidental shares at a price of $60 or less. Even with the run-up in the stock, Occidental trades for less than six times projected 2022 earnings.' https://t.co/vMXvtFnMWZ
— Jesse Felder (@jessefelder) July 2, 2022
Clearly he doesn’t suffer from the same failure of imagination that retail investors currently do.
Lot of people assuming commodities can’t rally in recession, and everybody knows that everybody knows this. But that is a failure of imagination + recency bias. Look at 1973, 1980, 1990 commodity-induced recessions. pic.twitter.com/CXjZZnM8hR
— Paulo Macro (@PauloMacro) July 17, 2022