Oil and technology stocks have not historically been a popular investment combination, but given the current market conditions, they may be the perfect match. As big technology companies continue to lead the market gains, diversifying one’s portfolio away from the tech sector may be a prudent move. Oil stocks have not performed as well as tech stocks this year, but they have the potential to provide a counterbalance to tech’s volatility. In fact, the Energy Select Sector SPDR ETF has shown almost no correlation with the Technology Select Sector SPDR ETF or the VanEck Semiconductors ETF, making it a potentially valuable addition to a diversified portfolio.
Despite relatively lackluster performance this year, energy stocks are showing signs of a potential rally. The Energy ETF has held its 200-day moving average despite a recent pullback, and if it can break through resistance levels, it may be poised for a new leg up. Factors like the price of oil, which is expected to hold steady or even rise further, could also support a rally in energy stocks. Strong oil demand and low OPEC seaborne exports suggest that oil prices could continue to climb, benefitting companies like Coterra Energy, EOG Resources, Western Oil, and Exxon Mobil.
Exxon Mobil, in particular, has been singled out as a top stock pick by UBS analyst Josh Silverstein. The company’s plans for cost reductions, new projects, and low-carbon investments could help drive profit growth and shareholder returns, even without a significant increase in oil prices. With the potential to reach $154 per share, Exxon Mobil offers a compelling investment opportunity that contrasts with the traditional high-flying tech stocks.
In summary, diversifying one’s portfolio with oil stocks could provide a valuable hedge against potential tech sector downturns. While tech stocks have driven much of the recent market gains, it may be worthwhile to consider adding oil stocks like Exxon Mobil to capitalize on potential future opportunities. Oil and technology may not mix in nature, but in the investment world, they could be a match made in heaven.
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https://www.barrons.com/amp/articles/exxon-oil-nvidia-big-tech-opec-dee8fcd8