Latest news with #SavitaSubramanian
Yahoo
3 days ago
- Business
- Yahoo
Bank of America says to bet on this neglected part of the Trump trade
Energy stocks have lost their appeal among fund managers despite Trump's push for more drilling. Large investors have reduced energy exposure following poor sector performance in Trump's first term. Bank of America upgraded its energy sector rating, citing strong cash flow and inflation resilience. A part of the market once considered a classic "Trump trade" has been left behind by investors, but they might want to reconsider, Bank of America said. Enthusiasm for energy stocks has fizzled out among big investors, despite the president's mantra of "drill, baby, drill." According to Bank of America, large-cap active mutual funds have reduced their energy holdings the most out of any sector in the past three months, and hedge funds are shorting energy more than any other S&P 500 sector. The downbeat views on energy follow a lackluster performance during Trump's first term. However, while institutional players flee the space, Bank of America sees an opportunity. The bank still sees plenty of upside and upgraded its rating to overweight in a note last month. It's not just the fact that institutional buyers may be nearing capitulation, though. Energy is a top performer in times of inflation and stagflation, thanks to the sector's focus on cash dividends. Bank of America pointed to the sector's strong free cash flow generation as a sign that energy stocks are in good shape and can provide income to investors in times of rising prices. The sector is also well insulated from tariffs compared to other parts of the market, as Bank of America believes energy companies would be largely exempt from protectionist trade policies. Historically, the energy sector has been sensitive to oil prices, which could be a concern crude remains stuck in a rut. But since 2016, the energy sector's sensitivity to oil has dropped by a third, which Bank of America attributes to the sector's focus on distributing dividends. That means the sector will be shielded in a stagflationary scenario with lower growth and energy prices. "If stagflation is the base case, Energy is more likely to outperform than underperform," Savita Subramanian, head of US equity and quantitative strategy at the bank, wrote. Read the original article on Business Insider Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data
Business Insider
3 days ago
- Business
- Business Insider
Bank of America says to bet on this neglected part of the Trump trade
A part of the market once considered a classic "Trump trade" has been left behind by investors, but they might want to reconsider, Bank of America said. Enthusiasm for energy stocks has fizzled out among big investors, despite the president's mantra of " drill, baby, drill." According to Bank of America, large-cap active mutual funds have reduced their energy holdings the most out of any sector in the past three months, and hedge funds are shorting energy more than any other S&P 500 sector. The downbeat views on energy follow a lackluster performance during Trump's first term. However, while institutional players flee the space, Bank of America sees an opportunity. The bank still sees plenty of upside and upgraded its rating to overweight in a note last month. It's not just the fact that institutional buyers may be nearing capitulation, though. Energy is a top performer in times of inflation and stagflation, thanks to the sector's focus on cash dividends. Bank of America pointed to the sector's strong free cash flow generation as a sign that energy stocks are in good shape and can provide income to investors in times of rising prices. The sector is also well insulated from tariffs compared to other parts of the market, as Bank of America believes energy companies would be largely exempt from protectionist trade policies. Historically, the energy sector has been sensitive to oil prices, which could be a concern crude remains stuck in a rut. But since 2016, the energy sector's sensitivity to oil has dropped by a third, which Bank of America attributes to the sector's focus on distributing dividends. That means the sector will be shielded in a stagflationary scenario with lower growth and energy prices. "If stagflation is the base case, Energy is more likely to outperform than underperform," Savita Subramanian, head of US equity and quantitative strategy at the bank, wrote.
CNBC
11-05-2025
- Business
- CNBC
Follow the money: Insiders at these companies are buying during the market stress
Recent market volatility has led some chief executives and other insiders of certain names to buy shares, according to Bank of America. Stocks have had a rocky start to the year, facing pressure amid economic worries and shakiness around President Donald Trump's plans to impose tariffs on goods from a slew of countries. The S & P 500 has fallen more than 3% in 2025. However, insiders have swooped in to snap up stocks as of late. "Positioning of active hedge funds and mutual funds gives insight into consensus among fundamental investors. But insider positioning can be considered the 'smartest money,'" wrote Savita Subramanian, head of U.S. equity and quantitative strategy at Bank of America, in a note earlier this month. "Interestingly, extreme insider buying/selling has been a better contrary indicator since 2010, perhaps as insiders tend to support stocks by buying amidst a drop and/or they sell early into strength," she added. Subramanian has found that over the past three months, meaningful insider buying has emerged at a number of companies, such as casino operator Wynn Resorts and cosmetics company Estee Lauder . Below are the top 10 S & P 500 companies where insiders have been snapping up shares. Wynn Resorts had the top insider buying as a percentage of its float – or shares available for trading by the public – at 0.53%. Billionaire Tilman Fertitta, CEO of Landry's, recently increased his stake in the casino name, buying 400,000 shares over a few days in early April, according to a securities filing and Verity Data. This comes after the owner of the Houston Rockets previously increased his stake to 9.9% last year to become the company's largest individual shareholder. Shares of Wynn Resorts are up 2% in 2025. The name is liked on Wall Street, with 15 out of 18 analysts rating it a buy or strong buy, per LSEG. Consensus price targets call for more than 20% upside. WYNN 1M mountain WYNN, 1-month Occidental Petroleum was also on the list with insider buying being 0.11% of its float in the past three months. Warren Buffett's Berkshire Hathaway has been buying more shares of the Houston-based energy company. In fact, it bought 763,017 shares back in February for $35.7 million. Occidental posted first-quarter adjusted earnings that surpassed the Street's estimates on Wednesday, landing at 87 cents a share, while FactSet consensus estimates called for 78 cents a share. Shares are off more than 14% in 2025, and analysts largely rate the stock hold. Consensus price targets call for 14% upside, per LSEG. OXY 6M mountain OXY, 6-month Franklin Resources , which was ranked sixth on the list, saw insider buying over the past three months at 0.04% of its float. Billionaire Charles Johnson, who retired as chairman of the company in 2013 , bought 100,000 shares in March for $2 million. Shares are up more than 3% in 2025. Most analysts rate the name hold, and consensus price targets call for the stock to slide about 7% from current levels, per LSEG.
CNBC
08-05-2025
- Business
- CNBC
This year is ugly for energy, but one income-producing corner of the market is holding up
While last month was turbulent for the energy sector overall, a few bright spots within the industry managed to emerge – and those names happen to offer attractive dividends. The S & P 500 energy sector posted a nearly 14% decline for April, languishing alongside the falling price of oil. U.S. crude oil futures tanked nearly 19% last month, while Brent crude , the international oil benchmark, slid more than 15%. Recession fears and oversupply concerns fueled the slide in oil prices, with OPEC+ agreeing to boost production by 410,000 barrels per day in June . But even as the energy sector has suffered in 2025, it remains attractive, Savita Subramanian, head of U.S. equity and quantitative strategy at Bank of America, said in a note last week, when her team upgraded the group to overweight from market-weight. "S & P Energy is different this time: [management] compensation is aligned not with production targets but with cash return – dividends are sacrosanct," she said, adding that energy companies should largely be exempt from tariffs and their free cash flow yield is "well above average at 6%." "If stagflation is the base case, Energy is more likely to outperform than underperform," Subramanian wrote. In April, some corners of the energy sector managed to stave off the worst of the declines: midstream and downstream companies – better known as pipelines and refiners. Consider that the Global X MLP & Energy Infrastructure ETF (MLPX) fell 5.7% in April, while the VanEck Oil Refiners ETF (CRAK) dropped 3.5%. CRAK YTD mountain VanEck Oil Refiners ETF in 2025 Both are also managing to hold their own in 2025, with MLPX down less than 1% and CRAK up more than 4%, even as the energy sector as a whole is down more than 3%. "Upstream – exploration and production – got smoked, and midstream – the pipelines held up relatively better," said Stephen Kolano, chief investment officer at Integrated Partners in Waltham, Mass. "With commodities prices coming down, exploration and production are most sensitive to those prices." Pipelines are better insulated from that pressure as they are volume businesses – they transport and store oil and gas – while refiners are about to benefit from seasonal advantages as the summer driving season begins, he said. Attractive dividends "It's classically defined as nothing more than a towrope that moves product, be it oil, gas or water, from one place to the other," Philip Blancato, chief market strategist at Osaic, said of pipelines. He noted that the dividends help smooth out volatile moves in the stocks. Some of the pipeline companies are structured as master limited partnerships, which is part of the reason they can offer attractive dividend yields. While these partnerships aren't subject to federal income taxes, the limited partners – the investors – are on the hook for taxes on distributed income. That's different from the way C-corporations are taxed, where the business is subject to corporate income taxes and shareholders are responsible for taxes on dividends received. Those high dividends also come with tax complexities, where the partnership sends a Schedule K-1 to investors, detailing the income received. "It's nice to get a big dividend, but if you get the K-1 late, you'll probably have to file your taxes late," Blancato said. He highlighted Enterprise Products Partners . Shares are down about 2% in 2025 and have a dividend yield of 7%. Well liked The name is well liked on Wall Street, with 15 of 20 analysts rating it buy or strong buy and consensus price targets suggesting more than 21% upside, according to LSEG. Mizuho analyst Gabriel Moreen stuck with his outperform rating on Enterprise in late April, noting that while it posted a "weak" first quarter, it also shared "reassuring updates on 'big picture' themes." "We found it encouraging that management emphasized the outlook for Permian associated gas growth even if Permian crude [oil] production enters maintenance mode," he wrote. The analyst added that Enterprise still anticipates a "mid single-digit" cash flow improvement in 2026. Blancato also likes Western Midstream , once known as Western Gas, which pays a dividend yield of 9.9%. Shares are down nearly 4% in 2025. Most analysts covering the name rate it hold, but consensus price targets call for 10% upside, per LSEG. Even as these energy stocks offer solid dividends – limited partnerships in particular – investors should use them sparingly and understand they could see volatility in the stocks, Blancato said. "Think of this as a way to complement a core dividend strategy," he said. "Hold some bonds, some high-quality dividend payers. This is the sweetener in your coffee."
Yahoo
13-04-2025
- Business
- Yahoo
Put the P/E ratio in timeout for now
A version of this post first appeared on The forward price-earnings (P/E) multiple has limited value during normal times. And the metric arguably has even less value during periods of elevated uncertainty. That's because the E is based on analysts' estimates for the near future. And when the outlook for business is increasingly uncertain and rapidly changing, it can take time for many analysts to adjust that E. This is especially the case right now as many companies have not yet factored the impact of tariffs into their guidance, which analysts lean on when they establish their earnings forecasts. "We've been reading earnings call and conference transcripts closely since November across market capitalizations, sectors, and industries and feel fairly confident in saying that U.S. public companies have been very reluctant to discuss tariff impacts (outside of China) until specific details have been provided by the administration, and even then, many still have not given sell-side analysts a lot of specifics to start factoring into their models," RBC's Lori Calvasina wrote earlier this month. Assuming tariffs are negative for earnings — which is what everyone assumes — this means the E is being distorted higher by stale estimates. Forward earnings estimate haven't really moved amid the market sell-off. (Source: FactSet) With stock prices falling the way that they have been in recent weeks, the P/E ratio could be creating the illusion that stocks have gotten cheaper than they are in reality. Forward P/E ratios have come down. But is the E accurate? (Source: FactSet) Generally speaking, it's not a great idea to be trading in and out of the stock market, especially during periods of stress. It's especially treacherous to be trading based on P/E ratios, more so when the Es are unreliable. Unfortunately, we might not get a clean E any time soon. "There is a reasonable probability that absent some resolution/clarity, transparency could be compromised," BofA's Savita Subramanian wrote on Thursday. "Companies tend to shut down guidance amid uncertainty." This sentiment is in line with Goldman Sachs' David Kostin, who expects "during upcoming quarterly earnings calls fewer companies than usual will provide forward guidance." This is because recently announced tariffs have made it very difficult to project where business is headed. If you're going to trade, be careful about trading based on expectations for the near future. The savviest minds in the market caution this is a guessing game. There were several notable data points and macroeconomic developments since our last review: 👍 Inflation cools. The Consumer Price Index (CPI) in March was up 2.4% from a year ago, down from the 2.8% rate in February. Adjusted for food and energy prices, core CPI was up 2.8%, down from the prior month's 3.1% level. (Souce: @M_McDonough) On a month-over-month basis, CPI fell 0.1% amid lower energy prices. Core CPI was up just 0.1%. If you annualize the three-month trend in the monthly figures — a reflection of the short-term trend in prices — core CPI climbed 3.0%. (Source: Jason Furman) For more on inflation, read: 🎈and ✂️ ⛽️ Gas prices tick lower. From AAA: "Prices at the pump are coming down even though this is the time of year when gas prices go up. Supply and demand are the main reason for the dip. After OPEC+ announced it's increasing oil production next month by more than 400,000 barrels a day – much more than expected – the price of crude oil has been falling. Oversupply coupled with tepid gasoline demand is resulting in lower pump prices." (Source: AAA) For more on energy prices, read: 🛢️ 💼 Unemployment claims tick higher. Initial claims for unemployment benefits increased to 223,000 during the week ending April 5, up from 219,000 the week prior. This metric continues to be at levels historically associated with economic growth. (Source: DoL via FRED) For more context, read: 🏛️ and 💼 👎 Consumer vibes tumble. From the University of Michigan's April Surveys of Consumers: "Consumer sentiment fell for the fourth straight month, plunging 11% from March. This decline was, like the last month's, pervasive and unanimous across age, income, education, geographic region, and political affiliation. Sentiment has now lost more than 30% since December 2024 amid growing worries about trade war developments that have oscillated over the course of the year. Consumers report multiple warning signs that raise the risk of recession: expectations for business conditions, personal finances, incomes, inflation, and labor markets all continued to deteriorate this month." (Source: University of Michigan) Politics clearly plays a role in peoples' perception of the economy: (Source: Michael McDonough) Notably, expectations for inflation appear to be a partisan matter. From Bloomberg's Michael McDonough: "Democrats' inflation expectations continue to rise (7.9%), while Republicans' expectations, though still much lower (0.9%), are trending upward. Trend suggests some bipartisan agreement that tariffs may be inflationary. Independents are moving with Democrats." (Source: Michael McDonough) For more on sentiment, read: 😵💫 👎 Small business optimism falls. From the NFIB's March Small Business Optimism Index report: "This year will be one ruled by uncertainty. Global and domestic actions are generating insecurities in abundance, both political and economic. President Trump's administration is rearranging the deck chairs at a record pace..." (Source: NFIB) For more on the state of sentiment, read: 😵💫 Notably, the more tangible "hard" components of the index continue to hold up relatively well. (Source: NFIB) Keep in mind that during times of perceived stress, soft survey data tends to be more exaggerated than actual hard data. For more on this, read: 🙊 💳 Card spending data is holding up. From JPMorgan: "As of 01 Apr 2025, our Chase Consumer Card spending data (unadjusted) was 4.7% above the same day last year. Based on the Chase Consumer Card data through 01 Apr 2025, our estimate of the US Census March control measure of retail sales m/m is 0.40%." (Source: JPMorgan) From BofA: "March card spending per household was up 1.1% year-over-year (YoY), according to Bank of America aggregated credit and debit card data. Seasonally-adjusted card spending per household rose 0.2% month-over-month (MoM)." For more on the consumer, read: 🛍️ 🏠 Mortgage rates tick lower. According to Freddie Mac, the average 30-year fixed-rate mortgage declined to 6.62% from 6.64% last week. From Freddie Mac: "The average 30-year fixed-rate mortgage continues to trend down, remaining under 7% for the twelfth consecutive week. As purchase applications continue to climb, the spring homebuying season is shaping up to look more favorable than last year." (Source: Freddie Mac) There are 147.4 million housing units in the U.S., of which 86.9 million are owner-occupied and about 34.1 million of which are mortgage-free. Of those carrying mortgage debt, almost all have fixed-rate mortgages, and most of those mortgages have rates that were locked in before rates surged from 2021 lows. All of this is to say: Most homeowners are not particularly sensitive to movements in home prices or mortgage rates. For more on mortgages and home prices, read: 🏢 Offices remain relatively empty. From Kastle Systems: "Peak day office occupancy was 63.5% on Tuesday last week, down one tenth of a point from the previous week and half a point from its record high in February. Los Angeles set a new single-day record high of 57.2% on Wednesday. Occupancy in Washington, D.C. peaked on Tuesday at 62.9%, up 1.5 points from the previous week and only two tenths of a point lower than its record high set in March." (Source: Kastle) For more on office occupancy, read: 🏢 🇺🇸 Most U.S. states are still growing. From the Philly Fed's February State Coincident Indexes report: "Over the past three months, the indexes increased in 45 states, decreased in three states, and remained stable in two, for a three-month diffusion index of 84. Additionally, in the past month, the indexes increased in 38 states, decreased in six states, and remained stable in six, for a one-month diffusion index of 64." (Source: Philly Fed) 📉 Near-term GDP growth estimates are tracking negative. The Atlanta Fed's GDPNow model sees real GDP growth declining at a 2.4% rate in Q1. Adjusted for the impact of gold imports and exports, they see GDP falling at a 0.3% rate. (Source: Atlanta Fed) For more on GDP and the economy, read: 📉 and 🤨 🚨 The tariffs announced by President Trump as they stand threaten to upend global trade — with significant implications for the U.S. economy, corporate earnings, and the stock market. Until we get some more clarity, here's where things stand: Earnings look bullish: The long-term outlook for the stock market remains favorable, bolstered by expectations for years of earnings growth. And earnings are the most important driver of stock prices. Demand is positive: Demand for goods and services remains positive, supported by healthy consumer and business balance sheets. Job creation, while cooling, also remains positive, and the Federal Reserve — having resolved the inflation crisis — has shifted its focus toward supporting the labor market. But growth is cooling: While the economy remains healthy, growth has normalized from much hotter levels earlier in the cycle. The economy is less "coiled" these days as major tailwinds like excess job openings have faded. It has become harder to argue that growth is destiny. Actions speak louder than words: We are in an odd period given that the hard economic data has decoupled from the soft sentiment-oriented data. Consumer and business sentiment has been relatively poor, even as tangible consumer and business activity continue to grow and trend at record levels. From an investor's perspective, what matters is that the hard economic data continues to hold up. Stocks are not the economy: Analysts expect the U.S. stock market could outperform the U.S. economy, thanks largely due to positive operating leverage. Since the pandemic, companies have adjusted their cost structures aggressively. This has come with strategic layoffs and investment in new equipment, including hardware powered by AI. These moves are resulting in positive operating leverage, which means a modest amount of sales growth — in the cooling economy — is translating to robust earnings growth. Mind the ever-present risks: Of course, this does not mean we should get complacent. There will always be risks to worry about — such as U.S. political uncertainty, geopolitical turmoil, energy price volatility, cyber attacks, etc. There are also the dreaded unknowns. Any of these risks can flare up and spark short-term volatility in the markets. Investing is never a smooth ride: There's also the harsh reality that economic recessions and bear markets are developments that all long-term investors should expect to experience as they build wealth in the markets. Always keep your stock market seat belts fastened. Think long term: For now, there's no reason to believe there'll be a challenge that the economy and the markets won't be able to overcome over time. The long game remains undefeated, and it's a streak long-term investors can expect to continue. A version of this post first appeared on Sign in to access your portfolio
