This Left-for-Dead Sector Is Hitting Its Stride By Chris Igou, analyst, True Wealth
An industry decimated by the pandemic is coming back to life... Oil-services stocks were in their worst bear market in history last year. The sector fell roughly 90% from its all-time peak to its 2020 low. But after surviving the crisis, these companies are making money again. In fact, operations are the most profitable they've been in years. And that is likely to continue as the sector rebounds further. Let me explain...
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Plenty of industries were beaten up by COVID-19. But energy was one of the worst hit. Oil demand fell dramatically as folks stopped driving to work and stayed away from airports. And that crushed not just oil producers, but the companies that help them get oil out of the ground. Schlumberger (SLB) and Halliburton (HAL) are two of the largest oil-services companies on the planet. They sport market caps of $40 billion and $18 billion, respectively. These companies work on oil rigs and equipment that extracts oil. During an oil boom, they tend to be the best-performing stocks in the sector. But the opposite is also true when things go south... These businesses tend to suffer the most when a brutal bear market arrives. When oil companies shut down operations last year, Schlumberger and Halliburton had no business... and profits plummeted. Heck, there were no profits at all. Today is a different story. Oil is roaring back, currently priced at well over $70 per barrel. And the sector is now profitable once again after those difficult times. Schlumberger's and Halliburton's operating margins are at their highest levels in years. Take a look... You can see margins fell through the floor in the last two years. But the chart also shows the sharp bounce back in 2021. Today, operating margins are at their highest levels in more than five years. Schlumberger's is near 12% for the first time since 2014. And Halliburton's is in the same ballpark. Investors who wondered if these companies would survive the pandemic have their answer now... heck yes. The major players in the oil-services sector are profitable once again. These stocks have both risen as a result. But the moves we've seen so far could only be the beginning. Life is getting back to normal. And that's a huge win for these companies. We can't know for sure how long this new bull market in oil will last. But as long as the boom is here, these companies should continue to thrive. Energy stocks were left for dead this time last year. But things have changed. Oil-services stocks – some of the worst hit from COVID-19 – are bouncing back... And you should bet this trend will continue. Good investing, Chris Igou | Further Reading Since falling stocks tend to keep falling, looking for value in beaten-up areas of the market is usually a dangerous way to invest. But right now, we're seeing a setup in the small-cap market that could lead to double-digit gains... Read more here: It's Time for a Reversal in Small Caps. When too many investors pile up on the same side of a trade, the opposite outcome is likely. And with investors hurrying into "safe haven" assets today, the crowd could be missing out on further upside from here... Get the full story here: Don't Rush Into This Popular Bet Today. |
INSIDE TODAY'S
DailyWealth Premium This roaring sector is about to start its next leg higher... Oil services aren't the only stocks that are breaking out in the post-pandemic world. This sector is turning the corner, and it could be at the start of its next leg higher... Click here to get immediate access. Market Notes CONSUMERS LOVE THIS LIFESTYLE FOOTWEAR MAKER Today, we're looking at a company that's recovering well from the pandemic, thanks to its strong reputation... Longtime readers know we're always on the lookout for uptrends in powerful brands. Customers tend to stick to their favorite names... And they're willing to pay more for brands they trust. Today's company shows these benefits in action... Deckers Outdoor (DECK) is a $10 billion provider of footwear, apparel, and accessories. It boasts well-known brands such as Teva sandals, HOKA ONE ONE running shoes, and its flagship UGG boots. Despite only having roughly two-thirds of its stores open in the first quarter, that period was Deckers' most profitable first quarter ever... primarily driven by UGG and HOKA ONE ONE sales. Deckers posted net sales of $505 million, up 78% year over year. As you can see in today's chart, DECK shares are skyrocketing. They're up more than 350% from last year's March lows... And they just reached a fresh all-time high. This is more proof that investing in powerful brands can lead to big gains...
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