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The price of oil has an impact on the entire economy
The good dividend yields speak for lac shares
Rising commodity prices and solid financial position of oil companies
Mad Money presenter Jim Cramer is known for his stock market advice. With the stock market selling out now, the former hedge fund manager advises investors to look closely at the many stocks currently hit to see which stocks are worth buying. While it’s fair to say the buy-the-dip strategy is still in place, Cramer said that’s not true. The only noteworthy decline is in sector stocks l. Everything else is “as they say now, a transaction and nothing more,” the expert told CNBC.
The oil sector stands out from the rest of the market
Back in May, the flagship investor advised investors on his CNBC show not to panic and exit the stock market, but to focus on long-term values. The only sensible overweight in the portfolio is and will remain in oil, as the oil sector stands out from the rest of the market. Even if the stock were dumped, new buyers would arrive quickly and keep prices high, Jim Cramer said on today’s show.
The price of oil spills across the economy and is a nightmare for the US Federal Reserve because “every time the price of crude rises, the chances of a recession increase,” Cramer told CNBC. And he believes commodity prices will continue to rise, and even President Biden can’t do much about it. Therefore, the lesson must be “stay invested in lacts”.
Three giants are positioning themselves well in the current commodity cycle
Jim Cramer favors the three oil companies Exxon Mobil, Products Partners (EPD) and Magellan Midstream Partners (MMP). The largest oil company in the United States, Exxon Mobil, will also be ahead of its competitors in 2022 in terms of sales (395 billion US dollars) and operating profit (Ebitda of 87 billion US dollars).
Exxon kept its dividend stable throughout the two years of the pandemic and has increased it ever since. This is possible, according to Yahoo Finance, as commodity prices are great and the oil company’s free cash flow saw a huge increase to $ 10.8 billion from $ 6.9 billion a year earlier. . The company’s share buyback program was increased to $ 30 billion by 2023.
Evercore experts updated Exxon stock to “outperform” in early May with a price target of $ 120. This corresponds to a potential upside of 15%.
Products Partners (EPD) operates approximately 50,000 miles of natural gas, liquid natural gas (NGL), crude oil, refining and petrochemical pipelines and the latest figures speak for themselves: Products Partners reported sales of $ 13.01 billion with an increase of about 42% compared to last year. However, earnings per share of $ 0.60 were down 6.25% year-over-year. The company currently has a record free cash flow of $ 1.8 billion, according to Yahoo Finance, which is 1.8 times its current quarterly payment of 6.5%.
The stock price target was raised by Mizuho analysts to USD 32, which corresponds to a potential upside of around 26 percent (as of the closing price on June 15, 2022).
Magellan Midstream Partners increased its revenues in 2021 by approximately $ 674 million by about 2% year-on-year and, like the two companies above, is well positioned for the current commodity cycle, Cramer said.
The Company manages approximately 15,771 kilometers of pipelines for refined products and crude oil, 54 connected terminals and two ship storage terminals. The total storage capacity is 39 million barrels. With an annual yield of 7.8 percent and a coverage of free cash flow of payment of 1.24 times, the stock is a strong yield.
JPMorgan analysts recently updated the stock to “overweight” with a price target of $ 57. This is approximately 15 percent above the current price (as of: closing price on June 15, 2022).
Financeen.net editorial staff
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