With worries over a coming economic slowdown and a continuing trade war, investors may be thinking more about about where to put their money. The attack on Saudi Arabian oil sites on Sept. 14 that destroyed 5% of the world’s supply sent oil stocks to the highest they’d been in more than a decade.
As some investors worry, one analyst is confident that oil and energy are a safe place to invest.
“A lot of stocks in the energy sector set up very well in an environment where we still see global demand rising over the next several decades,” said Rob Thummel, managing director and senior portfolio manager at Tortoise, on “The First Trade” this morning. “If you look at the energy sector relative to other sectors in the S&P 500, the energy sector offers a yield that's probably one-and-a-half times the broad S&P 500,” he said.
“The enterprise-value-to-EBITDA are cash-flow multiples that a lot of investors look at to value sectors across the entire S&P 500. The energy sectors’ enterprise-value-to-EBITDA multiple is basically half the broader market,” said Thummel.
Investors concerns’ about increasing global energy demand, the collapse of oil prices and natural gas prices, and commodity prices isn’t putting off Thummel.
“This is a really good opportunity to be buying energy stocks,” he said. “Energy is essential globally. You need energy to basically do anything – to drive our cars, to heat our homes, to cool our homes. And where does that energy come from? It comes from oil. It comes from natural gas. It comes from a little bit of coal. It comes from renewables, as well.”
Because energy is so essential, “investors want to have a piece of that in their portfolios,” he said.
Right now, the two biggest factors affecting oil are the Saudi Arabia attacks, and the U.S.-China trade war. “It's a good time to just be gradually dollar-cost averaging into the energy sector over time,” Thummel said. “And if and when this trade war ends, you'll see a boost in global energy demand, we think, going forward.”