The Rational Behind the Decision
The recurrent inquiry about my focus on bullish stocks or those with future potential isn’t unusual. Yet, my rationale is clear: the quest for lucrative investments trumps the pursuit of stock divestment.
Why? Because with close to 58,500 listed companies globally, identifying high-yield stocks amidst these numbers is akin to panning for gold in a vast river – a challenging pursuit indeed.
Given my unwavering bullish outlook on oil since the pandemic’s zenith in 2020, my initial foray into the energy sector involved acquiring shares in Exxon Mobil (XOM) when it was priced at around $31.
An intriguing period it was, as the tech frenzy reached its zenith, overshadowing enticing value stocks such as Exxon.
While I still hold a favorable view of Exxon in the long term (I reiterate, my goal isn’t to sow doubt about XOM), my recent move involved divesting from Exxon and redirecting my investment to Canadian Natural Resources (NYSE:CNQ), the second-largest exploration and production energy stock on the New York Stock Exchange, boasting a market cap of approximately $70 billion compared to Exxon’s $400 billion.
After months of podiatric discussions on oil and gas across various platforms, I felt compelled to address the persistent query regarding investment destinations.
Indeed, although Exxon remains a resilient and dependable oil investment, in my estimation, CNQ is the superior choice.
Therefore, I intend to delineate the reasons underpinning my shift from XOM to CNQ in this composition and elucidate why I have not wavered in this decision, despite Exxon’s standing as one of the most secure oil investments globally.
So, let’s delve deeper!
Sustaining the Bull Case
Prior to dissecting individual stocks, it’s vital to underscore a crucial aspect of my thesis: the aspect of demand.
Since 2020, my stance has been unequivocal – I firmly believe that notwithstanding environmental initiatives, oil and gas will remain pivotal components of our energy matrix for decades to come.
The same holds true for coal, especially with burgeoning energy needs in developing economies.
For instance, India’s projected spike in coal demand in the years ahead indicates a significant shortfall in meeting the requisites for the net-zero by 2050 initiative!
As I highlighted on Twitter recently, a developed nation like Germany consumes 6 times more electricity per capita than India, while the United States consumes 12 times more.
While multiple influences are at play, these developments fortify my conviction that any paradigm where global fossil fuel demand dwindles remains distant.
Javier Blas, an energy expert at Bloomberg, appears to concur, assessing oil demand beyond 2024.
According to his assessment, despite sanguine perspectives about the global economy breaking free from oil dependence, early indications of the energy transition are proving elusive.
The Energy Information Administration’s (“EIA”) prognosis suggests a 1.2 million barrels per day uptick in global oil demand for 2025, marginally lower than the anticipated 1.4 million in 2024.
Historically, global crude demand has consistently surged, averaging 1.05 million barrels per day from 1991 to 2023. Discounting the COVID-19 impact, the average oil demand growth over the last 30 years hovers around 1.18 million barrels per day.
Should the EIA’s prognostications materialize, global crude demand will clock an annual mean of 103.7 million barrels per day by 2025. Notably, China and India are poised to significantly drive this growth, while industrialized nations could witness a contraction in oil consumption.
From a personal vantage point, my bullish outlook transcends the EIA’s projections, as I perceive the agency as often overly pessimistic when it comes to oil demand growth.
As alluded to earlier, my departure from Exxon does not stem from antipathy towards the company. It remains a well-administered entity with an AA- credit rating – one of the premium ratings globally across all sectors and industries.
Furthermore, by virtue of its magnitude, the company constitutes 22.7% of the Energy ETF (XLE), securing the top spot in terms of holdings.
