Nick Kunze of Sanlam Private Wealth on what the smart money is doing
14 March 2024 - 05:00
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Nick Kunze, senior portfolio manager: Sanlam Private Wealth
Buy: ExxonMobil
ExxonMobil is an international energy and petrochemical company. The outstanding feature of commodity markets as we push into 2024 remains the overt weaponisation of commodities, particularly industrial commodities such as oil and gas, and the minerals critical for the renewable energy transition. This closely parallels the expansion of regional wars provoked by Russia’s invasion of Ukraine, the conflict in Gaza, and increasing naval and air confrontations between China and the US, with its allies in the Asia-Pacific region. In 2023, the S&P 500 energy sector declined 1.33% while the broader S&P 500 was up more than 26% for the year. Exxon reported mixed quarterly earnings on February 2, which didn’t help the stock, but it has bounced back and is up about 7% year to date, though still behind the 85% move from certain AI market darlings. At a forward p:e of 12 the stock appears cheap given all the above.
Sell: Tesla
Tesla designs, develops, manufactures, sells and leases high-performance electric vehicles (EVs) and energy generation and storage systems, and offers services related to its products. Once the market’s star performer, the stock took just 11 years to reach a $1-trillion market capitalisation amid a surge in popularity for its signature EVs and a broader investment zeitgeist surrounding CEO Elon Musk. This year, however, the stock has found itself in a $200bn rut amid fading EV demand, intensifying competition from China-based rivals, and supply chain disruptions tied to the conflict in the Middle East that have combined to turn investors against the group. The shares have fallen nearly 30% since the start of the year and the stock has lost almost $650bn in market value from its November 2021 peak. Tesla is facing increasing competition from China, with BYD having overtaken it in global battery-electric vehicle deliveries in the fourth quarter of 2023. At a current p:e of 41, it still looks expensive. Tesla stock has had monster runs and could again. But it’s not a buy now.
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BROKERS’ NOTES: Buy ExxonMobil, sell Tesla
Nick Kunze of Sanlam Private Wealth on what the smart money is doing
Nick Kunze, senior portfolio manager: Sanlam Private Wealth
Buy: ExxonMobil
ExxonMobil is an international energy and petrochemical company. The outstanding feature of commodity markets as we push into 2024 remains the overt weaponisation of commodities, particularly industrial commodities such as oil and gas, and the minerals critical for the renewable energy transition. This closely parallels the expansion of regional wars provoked by Russia’s invasion of Ukraine, the conflict in Gaza, and increasing naval and air confrontations between China and the US, with its allies in the Asia-Pacific region. In 2023, the S&P 500 energy sector declined 1.33% while the broader S&P 500 was up more than 26% for the year. Exxon reported mixed quarterly earnings on February 2, which didn’t help the stock, but it has bounced back and is up about 7% year to date, though still behind the 85% move from certain AI market darlings. At a forward p:e of 12 the stock appears cheap given all the above.
Sell: Tesla
Tesla designs, develops, manufactures, sells and leases high-performance electric vehicles (EVs) and energy generation and storage systems, and offers services related to its products. Once the market’s star performer, the stock took just 11 years to reach a $1-trillion market capitalisation amid a surge in popularity for its signature EVs and a broader investment zeitgeist surrounding CEO Elon Musk. This year, however, the stock has found itself in a $200bn rut amid fading EV demand, intensifying competition from China-based rivals, and supply chain disruptions tied to the conflict in the Middle East that have combined to turn investors against the group. The shares have fallen nearly 30% since the start of the year and the stock has lost almost $650bn in market value from its November 2021 peak. Tesla is facing increasing competition from China, with BYD having overtaken it in global battery-electric vehicle deliveries in the fourth quarter of 2023. At a current p:e of 41, it still looks expensive. Tesla stock has had monster runs and could again. But it’s not a buy now.
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