Last year the FTSE oil sector earnings grew 26.6%. This year expect growth to hover around the 30% mark. If you joined bandwagon early this year you would have already made 12%. How was this achieved? Clearly oil prices have escalated due to geopolitical risks. However supply and demand distortions have also played a significant role which stem from weather events to shortages. And not to forget China and India which continue to churn impressive economic performance.
How analyst expectations helped us? Imagine analysts expected earnings growth for FTSE oils of -4% at the beginning of the year when oil prices were escalating. This presents a fantastic opportunity. Since the oil sector has been upgraded over 35%, oil prices have doubled.
Near term oils continue to look appealing. Although a significant portion of the growth has been priced in significant risk in the market remains. The drivers to oil remain persistent and safe havens continue to be the preferred investment choice. We remain bullish in the near term, particularly as dividends yields remain around 3%.
These views are independent of FactSet Ltd and are proprietary to Bobby Rakhit. For the full report and individual sector reviews and recommendations please contact rakhitreport@yahoo.co.uk.