Three slick choices – Oil-inspired stocks for your portfolio
Topics covered in this article:
As the world continues to navigate lockdown, the way we once consumed energy and travel has now changed. With an exit plan mapped out and millions of vaccines already distributed, how will stocks from these industries fair?
This week I look at three big hitters: ExxonMobil (XOM), General Electric (GEC) & International Airlines Group (IAG).
Over the last six months, shares in the US-based oil and gas giant have outperformed those in the industry, gaining 56% compared with the industry’s 45.6% growth. Could this bull-run continue for the remainder of 2021?
Over the last few years the oil and gas industry has been subdued and the same was expected in 2020 and 2021 given the pandemic. However, due to nationwide lockdowns and stay at home orders, demand for transport fuels dropped causing the price of oil to follow suit. Will we see a price increase as people begin to travel again?
The oil and gas multinational recently lodged a proposal to the National Hydrocarbons Agency (ANH) of Colombia to initiate a fracking pilot project, the second of its kind. Colombia is the third-largest producer of oil and is heavily dependent on crude oil for its economy, making the proposition by ExxonMobil a highly desirable one.
General Electric (GEL)
Much like ExxonMobil, during the pandemic shares in GE (General Electric) enjoyed a surge in price thanks to people staying at home. 2020 saw shares in the company skyrocket to 73%, ending the year down only 3.2%.
With airline travel almost possible again, GE Aviation expects business as usual with ongoing strength in military aviation poised to improve the company’s free cash flow position. Meanwhile, GE Healthcare is set to generate over $1.2 billion in the short term. Furthermore, CEO Larry Culp is expected to aggressively cut costs and overheads at GE Power in a bid to improve margins. Will this give GE Electric an additional boost?
International Airlines Group (IAG)
After a disastrous year for the aviation industry, things might be starting to look up for travel. The airline reached a nine-month high last week of around 220p and the share price is currently up 42% over the past 12 months despite posting a record operating loss of €7.4 billion in 2020. Last year revenues sank by 69% from €25.5bn to €7.8bn.
Will we be going on a summer holiday abroad this year? With a third wave of Covid-19 hitting European shores and emerging doubt regarding the UKs plan to resume travel, can we expect to see a retreat? Last week, popular holiday destinations France and Germany, announced lockdowns to combat a third wave and it is still unclear whether UK citizens can expect to travel with no official position on the matter from the government. With lockdowns, confusion over travel corridors, testing and vaccinations contributing to booking hesitancy and a lack of investor confidence, is now the time to buy?
In a bid to resume normal travel, IAG’s boss Luis Gallego called for “international common testing and the introduction of digital health passes to reopen our skies safely”. IAG-owned British Airways recently saw a cash injection of £2.45bn through a government-backed loan. Could long-term shareholders be in for the holiday of a lifetime?