An Updated Outlook on Energy
The Dividend Cafe
The Dividend Cafe - The Bahnsen Group
4.9 • 572 Ratings
🗓️ 16 September 2022
⏱️ 27 minutes
🧾️ Download transcript
Summary
It is not accidental that I write so much about the Energy sector. First and most applicable, we are big energy investors at The Bahnsen Group, carrying an allocation in our Core Dividend portfolio that is triple the weight that the S&P 500 has. What is happening in energy markets has profound relevance for the economy at large, for all people in their everyday lives, and across all national borders. Few things are more globally relevant than access to energy.
But if I am being totally honest, even apart from the large financial exposure we have to the energy space, I love this subject because energy fascinates me. It should fascinate anyone who spends just sixty seconds thinking about the fact that natural resources around for thousands of years with almost no known utility have created a more significant increase in the quality of life for more people than anything under the sun. “Transformed energy” sits at the heart of all economic activity, as my friend Louis Gave is fond of saying.
You cannot destroy energy, which is both a law of the universe most of us learned in elementary school and, these days, apparently a vital message for investors. In the physical universe, it merely means energy is constantly changing – usually for the purpose of doing work – but in the investing world, I believe it means something different but perhaps not entirely disconnected.
So let’s do a little autumn analysis of the energy sector, where we are, where we may be going, and see what may edify us in the discussion. Let’s jump into the Dividend Cafe …
Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com
Transcript
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| 0:00.0 | Welcome to the Dividend Cafe, weekly market commentary focused on dividends in your portfolio and dividends in your understanding of economic life. |
| 0:12.4 | Well, hello and welcome to another Dividend Cafe. I am sitting in the California studio today. I've just gotten back from New York City and have |
| 0:22.6 | created a kind of special program today about the United States energy sector. It's a subject that |
| 0:30.0 | we have addressed plenty in Dividend Cafe this year, and really for many years, for those of you who |
| 0:36.9 | have been falling for a long time. |
| 0:39.7 | And there's sometimes a tendency for me to think, if I've covered a topic a few times already, |
| 0:44.2 | then, you know, just find a different topic. But this isn't a matter of beating a dead horse. |
| 0:48.5 | This is an ongoing work and flux of a very pertinent subject to investors. |
| 0:54.7 | We have a certain special place and why we focus on energy because it's a large |
| 1:01.2 | overweight in our portfolio management. |
| 1:03.5 | When you look at the energy holdings in our core dividend portfolio, it amounts to about |
| 1:10.3 | three times the weighting that the S&P 500 has an energy. |
| 1:17.0 | And prior to this big shift in sector allocation this year, where energy's done real well and |
| 1:24.7 | technology is done very poorly, we were about four times overweight |
| 1:29.9 | in energy relative to the S&P. And so I can't recall a time in my career where I haven't been |
| 1:36.3 | substantially overweight in energy. And yet since November of 2020, right around the time of the election and the latter portion of Q4, |
| 1:49.6 | all of a sudden the energy sector began initially. |
| 1:53.6 | It was just a recovery out of what had been obviously an awful year in 2020 in the COVID year, |
| 1:59.6 | but was the top performing sector in the stock market in |
| 2:03.7 | 2021 and has been not only the top performer in 2022, but basically one of the only positive |
| 2:10.3 | performers in what has been a very negative year. S&P's back to down about 20%, NASDAQ down 30 or even more than 30%, and yet you have energy, |
| 2:21.8 | which has really performed quite well. |
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