Big Oil Needs to Make Big changes
May 31 2021 - Team Stockal
Early movers in green energy could make Big Oil see red
It was a slick floor on the markets as two events this past week spelled turm-oil for Big Oil.
First, a Dutch court ordered Shell (RDS.A) to sharply reduce its carbon emissions. Analysts say that this could lead to a 12% decline in the company’s energy output, including a sharp drop in oil and gas sales.
Barely a few hours later, an activist investor won at least two seats on Exxon’s board leading to a rise in Exxon’s (XOM) shares by 1.2% on Wednesday.
The petroleum industry is facing mounted pressure to decarbonize on multiple fronts. For one, the International Energy Agency, a longtime industry advocate, set a target of net-zero carbon emissions by 2050.
The road ahead for the oil industry is indeed getting slicker.
Beyond the energy drama, Biden’s $6 Trillion Spending Plan aims to boost funding for infrastructure, healthcare and education and includes a sharp cut to greenhouse-gas emissions.
The Dow Jones Industrial Average rose modestly on the 28th, the last day of trading for the month of May as stocks jumped on Friday ahead of the long weekend.
For the week, Nasdaq (IXIC) gained 2.06% while the S&P 500 (GSPC) and Dow Jones Industrial Average (DJI) made less impressive gains of 1.16% and 0.94% respectively.
Top Stories Of The Week
Ford accelerates electric vehicle production
Ford’s ambitions to boost its EV production is picking up speed. Ford, the number two U.S. carmaker, expects 40% of the company’s global sales to be fully electric by 2030. Its shares rose 8.5% on Wednesday as it revealed that it would boost spending on EV development to $30 billion by 2025 – roughly a third more than it forecast earlier this year.
Ford stock ranks relatively well vs. all stocks, but not outstanding. On a monthly chart, Ford stock is breaking above its long-term downtrend going back to 1999.
Bottomline: It’s important to avoid buying stocks when they’re extended because that makes investors more vulnerable during a normal pullback. But do add it to your watchlist and keep an eye out for the development of a new proper entry.
Cannabis stocks on a high
A wave of deal-making has swept over the cannabis sector in recent months. The marijuana industry is expected to double in value by 2025, and many investors are seeking to profit. As states and entire countries decriminalize or legalize cannabis and/or its components, there are growing opportunities for entrepreneurs and existing companies. Earlier this month, Marijuana medical research growers received U.S. approval to cultivate cannabis for study, ending an effective freeze under the Trump administration.
As in any nascent industry, there are also plenty of investment risks. Canadian cannabis producer Canopy Growth Corp. (CGC) in May began trading on the New York Stock Exchange. The Canopy IPO followed the debut of Cronos Group (CRON) on the Nasdaq in February. MedMen, a U.S. marijuana company valued at $1.65 billion, had its IPO in Canada in May as well. Still, the industry remains volatile, and inconsistent regulations could make expansion difficult.
Lights. Camera. Amazon!
Amazon.com Inc. (AMZN) inked a deal to buy MGM Holdings, the historic film studio for $8.45 billion including debt. The deal marks Amazon’s second-largest acquisition in history, behind its $13.7 billion purchase of Whole Foods in 2017.
Psst, the MGM library consists of more than 4,000 films and 17,000 TV episodes and includes the Rocky, Legally Blonde, and James Bond franchises.
Amazon recently turned in a first-quarter earnings report that easily topped analyst estimates and was widely applauded by analysts. For more than eight months, however, Amazon stock has trended sideways. In the stock market, timing is critical, and it’s important to identify lower-risk entry points that also offer solid potential rewards.
The Great Chip Shortage didn’t crunch Dell & HP stocks
A pandemic-fueled run on computers helped HP (HPQ) and Dell Technologies (DELL) post strong financial results for the latest quarter despite a semiconductor shortage that is denting some industries.
The delay, which is affecting products from cars to smartphones, has been looming over the industry for some time. A series of external forces, including trade restrictions, offshoring and the global Covid-19 pandemic has been largely catalyzing the delay.
PC sales registered their strongest growth in a decade last year. This nods to a shift from mobile devices brought on by the coronavirus pandemic. PC shipments overall rose 13% in 2020 and are expected to increase 18% in 2021 despite the semiconductor shortage.
While the strong profits point to a bullish outlook for PCs, HP’s stock would only be a bargain if the company overcomes the secular declines of the PC and printing businesses after the crisis ends — which could prove challenging as more people return to work and stop upgrading their home PCs and printers.
What Else is Hot
- Google’s ‘healthy’ growth: Alphabet Inc.’s (GOOG) and HCA Healthcare Inc.have struck a deal to develop healthcare algorithms.
- BTS bites into McDs: McDonald’s (MCD) released its long-awaited meal with K-pop sensation BTS – the first celeb collab to launch globally.
- Mind the Gap: Gap (GPS) teams up with Walmart (WMT) – America’s largest retailer to launch a home decor brand.