Stock in Focus: Occidental Petroleum
Stock in Occidental Petroleum (OXY) fell 5.66% as the sell-off in banks spread to the energy sector. We think this is a good buying opportunity for high-quality energy companies – the company is trading at a fwd P/E of 10x earnings and is a best-in-class oil company (Warren Buffett’s Berkshire Hathaway) owns ~19.8% of Occidental). CEO Vicki Hollub is a one-of-a-kind operator — she has assiduously paid down debt and Occidental now produces strong cashflow – earnings have compounded 73% on a ten year basis. OXY trades close to 52 week lows and we think oil companies have been oversold due to sentiment rather than valuation. Key here is we don’t see oil demand slowing — with China’s reopening oil is very much in demand. We have added a 1% position in Occidental to the US model portfolio.
New Zealand Market Movers
The New Zealand market (NZX50, +0.2%) was up as it the recent selling took a breather.
The major news today is Pushpay receiving a revised offer of $1.42 per share on the mid-point of the $1.33 to $1.53 valuation, and +6% above its previous offer of $1.34. Pushpay says that major shareholders ACC, NZ Superannuation Fund, ANZ New Zealand Investments, Fisher Funds, Nikko Asset Management and Salt Funds which combined owned 18.6% have agreed to the offer. The higher offer and the market being a bit more nervous now means we believe this offer should be accepted. The stock is now up at $1.40 indicating a high certainty of the deal going through.
Australia Market Movers
The Australian Market (ASX200, +0.9%) saw bank risk easing, seeing regional banks that were hit hardest lift higher. We still think ANZ and Westpac feel like strong buys given their strong liquidity and balance sheets.
Most sectors were up, tech stocks recovering from the three-day losing streak. We note further legal action at BHP over the 2015 Samarco dam disaster in Brazil – the class lawsuit has 700,000 participants. We downgraded BHP to a hold recently as we think the commodities “boom” is over in the current market cycle.
US Market Movers
The S&P 500 whipsawed and ended up at -0.70%. In Europe the FTSE 100 declined -3.83% as Credit Suisse ran into a liquidity crunch; the Swiss central bank offered a liquidity backstop in an attempt to calm nerves — but we saw all European banks sell off regardless. In a sense, it’s a similar cycle to what we saw a couple of days ago with SVB. The market sold-off heavily and then rebounded. We think investors ought to take advantage of opportunity when and if it arises: OXY fell upon concerns re: the price of oil in spite of oil being more in demand than ever. Charles Schwab surged +5.06% to $59.55 — we had it as a buy at ~$51.91 a couple of days ago – this is a key example of “buying the fear”.
What Markets will be Watching this Week
Monday
Tuesday
Reserve Bank of Australia (RBA) interest rate decision
Wednesday
Thursday
Bank of Canada (BoC) interest rate decision
Friday
US Non-Farm Payrolls
Bank of Japan (BoJ) interest rate decision