XLE VS QQQ
Let’s talk about the trade of 2023! The energy index vs the Nasdaq, who will win in this battle of tech versus energy? Will big tech win or will the low multiples and inflation hedge appeal of the energy index draw the stock market dollars? Where will funds flow?
Bank accounts are now paying a hefty sum vs nothing over the past 15 years. All of a sudden earnings have a serious risk hurdle. Cash can pay, vs 2008-(beginning of 2022) when there was no risk-free hurdle and capital flowed to speculative and risky ventures.
Of course its possible that both do equally this year, a recovery in Nasdaq occurs. While at the same time energy enjoys higher valuations.
However, we are excited about some of the insanely low multiples in energy. Warren Buffet’s Occidental Petroleum makes $16 billion in annual cash flow while sporting a $53 billion market capitalization. Now that’s cheap and you have the Buffett blessing on management. The only time we have really been upset about Buffett’s management choice was regarding the debacle that was the Kraft-Heinz merger!
Now let’s look at Apple, down revenue reported last quarter. $2.5 trillion of market capitalization on $100 billion of cash flow. Facebook however, is cheaper at 10x cash flow! Microsoft has $84 billion of cash flow on $1.7 trillion of market capitalization, again expensive. Amazon also has a 20x+ cash flow multiple!
So in conclusion maybe the portfolio of 2023 is XLE & Facebook/(value stocks)?
What Happened to The Kraft-Heinz Merger?
The valuations of the energy and technology sectors have a complex history. Influenced by various factors such as technological advancements, market demand, geopolitical events, and regulatory changes.
Energy Sector:
1970s and 1980s: The energy sector experienced significant growth! Due to increasing demand for oil and gas, as well as high oil prices driven by geopolitical events such as the Arab-Israeli War and the Iranian Revolution. This led to high valuations for companies in the sector, such as ExxonMobil and Chevron.
1990s: The industry faced a decline as oil prices fell and supply exceeded demand, resulting in a drop in valuations. This was exacerbated by the Gulf War and the collapse of the Soviet Union. Leading to a glut of oil in the market.
2000s: Valuations rose again as oil prices increased due to rising demand from emerging economies such as China and India. However, the sector also faced challenges due to concerns over climate change and environmental regulations. As a result, leading to increased investment in renewable energy sources.
Technology Sector:
1980s and 1990s: The technology sector experienced rapid growth with the advent of personal computers and the internet. This led to high valuations for companies such as Microsoft, Intel, and Cisco.
2000s: The dot-com bubble burst in 2000, resulting in a significant decline in valuations for many technology companies. However, the sector recovered in the mid-2000s with the rise of social media and the proliferation of mobile devices. This led to high valuations for companies such as Apple, Google, and Facebook.
2010s: Valuations continued to rise as technology became increasingly integrated into all aspects of society. Companies such as Amazon and Netflix experienced astronomic growth. However, concerns over privacy and regulation, as well as competition from new entrants reared their ugly head. As a result, leading to increased volatility in the sector’s valuations.
Overall, the valuations of the energy and technology sectors have become influenced by a wide range of factors. And their history reflects the constantly changing nature of these industries.
Best of luck out there investors!
XLE VS QQQ
