Can some energy firms thrive amid low prices?

Where Maurice FitzMaurice thinks the energy business looks strong.

  • Facebook.
  • Twitter.
  • LinkedIn.
  • Print

"Exploration & production companies have been hurting because they need higher oil prices to thrive and, in some cases, survive, but that's not true for all segments of the energy sector," says Maurice FitzMaurice, portfolio manager of Fidelity® Select Energy Portfolio (FSENX).

According to FitzMaurice, the sector-wide sell-off early in 2020 has lowered the prices of energy stocks he thinks could still do well.

"It's created opportunities to buy shares of companies with resilient business models and financial flexibility for well below my assessment of fair value," he says.

Of particular focus for FitzMaurice have been high-quality companies; firms levered to natural-gas markets, including pipeline and terminal operators; and businesses with a strong order backlog.

For example, in March and April, he added notably to the fund's stakes in both Chevron (CVX) and ExxonMobil (XOM), believing each had the financial flexibility to weather a protracted decline in the energy sector.

He also increased holdings in Cheniere Energy (LNG), which operates 7 liquefied natural gas terminals, with 2 more under construction. About 85% of its business is subject to long-term contracts. FitzMaurice saw a strong opportunity for the company in the next decade—and possibly beyond—as natural gas takes market share from dirtier fuels.

Lastly, he boosted exposure to independent power producer and energy trader Vistra Energy (VST), partly because a large portion of its volumes in 2020 and 2021 are hedged against price declines, according to FitzMaurice.

"It's a stockpicker's environment," affirms FitzMaurice, "and I'm seeing what I think are good stocks at good prices to hold for the long term."

Fidelity® Select Energy Portfolio held securities mentioned in this article on April 30, 2020. As of this date, Chevron accounted for 20.43% of the fund's assets, ExxonMobil 13.95%, Cheniere Energy 5.11%, and Vistra Energy 2.86%.

Next steps to consider



Find stocks


Match ideas with potential investments using our Stock Screener.



5-step guide to trading


Learn what you need to know before trading the market.

A collection of current insights from our portfolio managers.

  • Facebook.
  • Twitter.
  • LinkedIn.
  • Print
Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

Because of their narrow focus, sector investments tend to be more volatile than investments that diversify across many sectors and companies.

Stock markets are volatile and can fluctuate significantly in response to company, industry, political, regulatory, market, or economic developments. Investing in stock involves risks, including the loss of principal.

As with all your investments through Fidelity, you must make your own determination whether an investment in any particular security or securities is consistent with your investment objectives, risk tolerance, financial situation, and evaluation of the security. Fidelity is not recommending or endorsing this investment by making it available to its customers.

Past performance is no guarantee of future results.

Views expressed are as of the date indicated, based on the information available at that time, and may change based on market or other conditions. Unless otherwise noted, the opinions provided are those of the speaker or author and not necessarily those of Fidelity Investments or its affiliates. Fidelity does not assume any duty to update any of the information.

Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917

857246.105.0
close
Please enter a valid e-mail address
Please enter a valid e-mail address
Important legal information about the e-mail you will be sending. By using this service, you agree to input your real e-mail address and only send it to people you know. It is a violation of law in some jurisdictions to falsely identify yourself in an e-mail. All information you provide will be used by Fidelity solely for the purpose of sending the e-mail on your behalf.The subject line of the e-mail you send will be "Fidelity.com: "

Your e-mail has been sent.
close

Your e-mail has been sent.