The plunge in the oil price has hit the energy sector hard, particularly in the US. In November the sector was down 8.9% as WTI Oil plummeted 18% in the month to a 5-year low.
“On the flipside of that oil move, the US airline sector rallied 17% in November and the US consumer sector rallied 5%. That is a simplistic and correct market response to a collapse in energy prices,” says Switzer Super Report expert Charlie Aitken.
This price collapse is also affecting inflation expectations.
“The fall in bond yields will support equity dividend yield and particularly equity dividend growth stocks,” Charlie says with speculation about RBA rate cuts next year to increase.
Telstra, IAG, AMP, Transurban and Wesfarmers remain Charlie’s preferred top five non-bank industrial yield ideas (although I know Switzer Super Report director Paul Rickard wouldn’t agree with him on IAG).
Paul instead likes Woolworths, which he says is good value at current prices.
“I think buying here will require some patience, as the short sellers seem to be getting more active.”
Woolworths Limited (WOW)
Source: Yahoo!7 Finance, 1 December 2014
FN Arena’s Rudi Filapek-Vandyck, appearing on Switzer TV last week also had a view on the energy players given the oil price plunge.
Although Woodside has been a dividend play of his since August last year, the fall in oil price will mean it will have to cut dividends. But he is still upbeat on Oil Search.
“Oil Search is probably the best growth stock that the Australian share market has and will also continue growing for at least another decade, but also the pace that that will happen will be slower because it’s so much easier to make larger margins when the oil price is above $100,” he said.
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