The price of Brent oil has operated at 54,78 dollars a barrel, losing - 1,62% compared to 55,68 at the close of the previous day in the financial market in London. But what is really important about this price is that it has developed a bearish rally since this financial asset was around 70 dollars a barrel. That is, with a depreciation of just over 20%. In what constitutes one of the strongest drops in crude oil in recent years. In this case, caused by the effects on the international economy of the virus in china and that is leading to a collapse in this important raw material
But a collateral aspect in the drop in crude oil it's how it's affected equity markets in general. Because in effect, its tentacles are also reaching the stock market, in one sense or another and that can be used in the operations of small and medium investors to adjust their portfolios. In this sense, it is very clear that there are some great losers and beneficiaries of this new scenario that has caused the loss of valuation in oil.
From this general scenario, there is no doubt that the major victims of the oil companies who are seeing their valuation on the stock market these days is lower than a few weeks ago. With depreciations that range between 2% and 8% and they are under heavy selling pressure these days. To the point that a good part of the capital of the international management companies is going to other safer stock market sectors. Preferably electricity companies that offer a more satisfactory return on savings to the interests of retailers and with an average annual profitability of 6%.
Drop in crude oil: the most affected
All the oil companies have left a lot of euros on the road these days. Within the national variable income the greatest exponent is Repsol which has been left almost 5% to reach very close to the levels of 12 euros for each share. When a few months ago it was above 14 euros and as one of the emerging values of the selective index of the stock market of our country, the Ibex 35. In this sense it has gone from showing an excellent technical aspect to a deterioration of its evolution in financial markets. To the point that a very important part of financial analysts have opted to undo positions in this value. Given the real risks that it may continue to decline in the coming weeks or months.
In addition, it must not be forgotten that a correction of a certain intensity is taking place that may take this raw material to levels even lower than the current ones. In other words, you have much more to lose than gain right now and therefore it is not worth risking your positions in the equity markets. From this approach to investment, it is better that you opt for other stock sectors that have a better appearance in their technical analysis and that allow you to make profitable savings with greater security and guarantees that these returns to capital are met.
Repsol in the target of the descents
The Ibex 35 oil company has gone in a few days from being one of the most recommended values of the equities of our country to being in a selling position after having broken supports of great importance in its technical analysis. Upon detecting that the risks are greater than the benefits that can be obtained in the opening of their positions. And that has been enhanced in recent days by the effects of the coronavirus in China. Without for the moment they have remitted their effects on the financial markets. Not surprisingly, it is being one of the most bearish values in the Spanish stock market. With a loss in its stock market valuation so far this year of just over 5%, in the squad of the most bearish in the first months of the year.
All this and despite the fact that Repsol obtained a net profit of 1.466 million euros in the first nine months of the year, compared to 2.171 million in the same period of the previous year. Where the adjusted net profit, which specifically measures the progress of the company's business, stood at 1.637 million euros, compared to the 1.720 million achieved between January and September 2018. The strength of the company's results and its capacity to generate cash led to the Board of Directors agreeing to propose to the next general meeting an additional improvement in shareholder remuneration through the amortization of 5% of the capital stock.
Benefited from the drop in crude oil
On the contrary, there is another group of values that are being strengthened by the drop in the price of crude oil. One of them is that of the air lines that benefit from this new scenario in this raw material. But with the contradiction that it is also another of the great harmed by the appearance of the coronavirus in China. With a very rare feeling that it is leaving among small and medium investors who do not know what to do with this class of securities, as for example in the specific case of IAG. Since on the one hand, it costs them less money for fuel, but at the same time it is seeing how many flights are being canceled, especially those directed to the Far East.
While on the other hand, another of the sectors that are coming out very well from this situation is electricity. By settling as a refuge in these kinds of scenarios as has happened historically for many years. Where investors seek shelter to save their savings and in this sense there is nothing better than companies that offer recurring profitability almost every year. In addition, they distribute one of the highest dividends of the variable income of our country, with an annual interest that round 6%. Much more than what all the banking products or derivatives of the fixed income markets offer.
Other securities not linked to crude oil
One of the data that reflects the evolution of the main European equity indices is that the Ibex 35 is being more punished than other European indices. But even so, stocks in the food sector are outperforming the rest. With a role equally of refuge from unwanted scenarios in equity markets. Where the invested capital can be kept much safer than another series of more aggressive stock market proposals, such as the oil companies or linked to the price of crude oil.
On the other hand, it cannot be forgotten that this class of securities are not so volatile and also generate a lower return, although with much more limited risks than in the rest. In addition, they generally have a dividend yield that can be very interesting for small and medium investors. Around 4% or 5%, depending on the stock values chosen by the retailers. While on the other hand, it may be a more suitable investment option for investors of a more defensive profile or cut and in which the preservation of their investment prevails over other kinds of considerations. Assuming that large capital gains are not going to be made in most cases. With an important diversification through different lines of business: food, distribution, etc. where positions can be taken from now on.
Exxon below expectations
At Exxon Mobil Corp, CEO Darren Woods' plan to revitalize the profits of America's largest oil and gas company is being thrown off course by the two businesses he knows best: chemicals and refining. According to industry analysts, another year of sluggish earnings could force Exxon to rethink your ambitious spending plans or weaken its ability to weather a further drop in oil prices. In this regard, it should be noted that Exxon already has to borrow or sell assets to pay part of the dividend payment to shareholders.
The oil company was long regarded as one of the best managed companies and best able to cope with price volatility due to its size. However, those benefits have waned in recent years, as a result of falling previously stable profits from chemicals. The total return to its shareholders has been negative (-13%) in the last 5 years (until this month), compared to a gain of +25% in Chevron Corp and +82% in BP, according to the latest reports from the sector.
Either way, it is one of the most volatile sectors at the moment, and therefore the best decision is to move away from its values. At least for the duration of this crude depreciation process.