Prominent investor says one non-tech sector is really promising

Even as Big Tech stocks, like the 'Magnificent 7,' are dropping, one other sector has been surging.

Aug 21, 2023 - 22:30

0 16

Prominent investor says one non-tech sector is really promising

After getting off to a strong start in 2023, the tech sector has started to crumble. Notable tech giants that, when grouped together, have been dubbed the "Magnificent 7," have driven the S&P 500's losses for the month of August, losing investors $623 billion as a group.

But as this one highly-lauded sector begins to stumble, the energy sector has some investors intrigued.

DON'T MISS: Upcoming earnings release could change the story of the 'Magnificent 7' tech stocks

Last year, according to Fidelity, was a "banner year" for energy stocks. The sector, bolstered by tightening supply and expanding demand, handily outperformed the S&P. But energy stocks tumbled on falling oil prices and recession concerns in the first half of 2023 even as tech-driven market rallies left them in the dust.

Recently, the sector, which was up around 6% for the current quarter as of early August, has begun to gain some ground back. Saudi Arabia cut its output by 1 million barrels a day in July, a move that boosted crude prices. And as recession fears are beginning to abate and crude demand is beginning to grow, some big oil companies have issued optimistic guidance for the year ahead.

Shell and BP increased their quarterly dividends and Chevron (CVX) - Get Free Report said that it expects “to deliver strong free cash flow for years to come."

More Technology:

"I think energy is one of the more interesting parts of the market now. The Magnificent 7, I would say they're sui generis, that's a whole other deal," Strategas' chairman and CEO Jason Trennert told CNBC. "But I think that's one place where you're getting a lot of cash flow, dividends. And for the first time in my lifetime, energy companies are good stewards of shareholder capital."

"Usually, these guys are put on Earth to punch holes in the ground," he added. "Now they're actually saying we want to return money back to the shareholders. In my opinion, that's one place investors can look to find some real value."

Oil prices rose Monday, with Brent crude up to $85 a barrel and U.S. West Texas Intermediate crude up to $81.90 a barrel.

"We still see a tight oil balance for the remainder of the year, which suggests that prices still have some room to run higher," Warren Patterson, ING's head of commodities research told Reuters.

Original Post