2024.02.12 11:48
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ETF Giant: US Oil Stocks and Chip Stocks are "Equally Good", but No One Cares

The CEO of VanEck Russia ETF bluntly stated that there is an abundant supply of oil and strong cash flow in oil companies, but oil stocks have been overlooked in the market.

Investment advisory firm VanEck's CEO, Jan van Eck, pointed out on February 10th that oil stocks in the US market have been overlooked and unfairly treated. In the future, investors with a more strategic vision may shift their focus to energy stocks.

VanEck is an American asset management company primarily engaged in the issuance and management of ETFs and mutual funds. It also operates hedge funds and separate accounts. As of 2020, VanEck has $69 billion in assets under management, making it the seventh-largest ETF issuer in the United States.

As of January 31st, VanEck's Oil Services ETF (OIH) held significant positions in Schlumberger, Halliburton, and Baker Hughes. OIH has experienced a nearly 7% decline in the past month and a more than 9% decline in the past 52 weeks. In contrast, the S&P 500 has risen more than 5% this year, and overseas chip stocks have continued to surge, with global chip LOFs seeing a 3% increase in the past week.

Amidst the continuous decline in oil stocks, VanEck, as well as Strategas' ETF and technical strategist Todd Sohn, are optimistic about the future of oil stocks. They believe that if technology stocks face setbacks this quarter, some more tactical investors may shift their focus to energy or healthcare stocks. Additionally, the recent best weekly performance of WTI crude oil prices since September last year indicates signs of recovery in the energy market. Media data statistics show that ExxonMobil, Chevron, Shell, Total, and BP spent a record-breaking $113.8 billion on dividends and stock buybacks in 2023, despite a significant drop in crude oil prices.

The cash returns in the oil industry in 2023 were 76% higher than the average level during the industry's peak years from 2011 to 2014, when crude oil prices were above $100 per barrel.

CEOs of oil companies are actively expanding their stock buyback programs, but so far, investors seem unconvinced.

The valuation of US oil stocks is only half that of large tech stocks. Investors generally believe that the cash flow in the oil industry is cyclical, overly reliant on OPEC decisions, and threatened by the global trend of transitioning away from fossil fuels.

The executives of the aforementioned five oil giants have all stated that as long as commodity prices remain stable, they may provide more dividends to shareholders this year.