This year, it’s been hard to find bullish calls on oil stocks, but Goldman Sachs recently issued one and that could provide ballast for ETFs, such as the FlexShares Morningstar Global Upstream Natural Resource Index Fund (NYSEArca: GUNR).
GUNR provides exposure to the rising demand for natural resources and tracks global companies in the energy, metals, and agriculture sectors while maintaining a core exposure to the timberlands and water resources sectors, which is a part of the risk management theme. Plus, the entire energy sector isn’t a wash as some quality names are standing out.
“In our view, the long-term positive macro thesis for an oil price recovery in 2021 remains very much intact and the sector offers an opportunity for significant upside into 2021, with appreciation potential of over 50% in many cases,” according to the bank.
Some data points indicate sell-side analysts remain bullish on energy stocks, including some GUNR components. Valuation may be one reason why. The recent sell-off may have opened up a potential buying opportunity for bargain hunters, especially in the oversold energy sector.
Goldman Outlook Good for GUNR
“We believe the stage has been set for oil prices to move meaningfully higher into 2021-2022,” notes Goldman Sachs. “The stocks should track both oil prices and positive earnings revisions.”
GUNR specifically identifies upstream natural resources equities based on a Morningstar industry classification system, with a balanced exposure to three traditional natural resource sectors, including agriculture, energy, and metals. With some wild moves in downtrodden energy stocks, the gambling element of energy investing is back, but investors can take some risk out of the equation with GUNR.
“Additionally, the often seen seasonal trade of the sector rallying into the end of the year, and early in the year lies ahead,” according to the bank.
On Monday, the IEA published its adjusted demand forecast for 2020, lowering its prior projections by 200,000 bpd to 91.7 bpd, which is a slight improvement over OPEC’s 90.2 million bpd forecast.
After a few months of quick demand recovery following the April historic lows, the International Energy Agency now predicts there will be difficulties in generating further recovery of crude demand, projecting the speed of recovery to fall off significantly as most of the ‘’easy gains’’ have already been gleaned from the market.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.