Bottom-Fishing The Energy Sector With Chevron
What do Warren Buffett, Carl Icahn, and Sam Zell have in common? Other than the fact that they are all billionaire financiers, they do share one other trait -- they are all bargain-hunting in the energy sector. And there are plenty of bargains to be had. After a tough decade in which the oil and gas sector's weighting in the S&P 500 index has dropped from 13% to 4%, the sector is now trading on less than half the market's price to book multiple. Is the smart money onto something?
There are also reasons other than valuation which may be attracting attention to the sector. With the recent listing of Saudi Aramco, the Saudis seem to be very keen in supporting the price of oil, which is the single largest driver of profitability in the sector. U.S. shale companies have also become a little more disciplined in managing their production, as funding has dried up. Finally, after a brief spate of weakness, the global economy seems to be on the mend. All of which would suggest that, for the intrepid investor anyway, the sector merits a second look.
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Source Fool.com
