I just read an unbelievably thorough report about cheap oil and who stands to benefit or lose. This blog will not be structured to entertain your fat fucking faces. Instead, it is an invitation for you to consume some information.
Energy drop benefits middle to lower income families most
Headline inflation should be pressured downward.
Morgan believes oil will bottom in Q2 of 2015 and suggests to overweight oil. Their extensive studies over 7 previous cycles suggest the energy sector bottoms one quarter before earnings bottom and markedly outperforms the market. They cite energy prices are at trough levels on a p/b basis.
Airlines should benefit across the board. However, several of them are hedged at $100+ oil, except two: AAL and ALGT have ZERO oil hedges and will participate 100%.
44% of ALGT expenses are fuel.
The plebeian sub $50,000 income benefit most, especially idiots who buy $150 sneaker. FL, FINL and BWS are foot ware favs and PLCE for bratty kids.
Asset Managers: KKR, APO, OAK and BX benefit most, due to lack of energy exposure and tonnes of cash.
Conversely, CF and AB are fucked.
Fuel efficiency standard play: BWA
Lower fuel might lead people to add items to their cars. Bullish on MGA, LEA, DLPH, ALV, HAR, TEN, DAN, AXL
TSLA is fucked.
SYF has zero loans to energy space.
COF and FITB also have little to no energy exposure.
HBHC, BOKF,CFR and ZION are leveraged to oil, as much as 15% of loans. Ergo, they’re fucked.
Get long domestic beverage stocks: MNST, STZ.
CHD and CLX have 80% exposure to domestic sales, NWL 68%.
Chem plays with large oil inputs include: PPG, RPM, SHW, VAL.
Challenged: DOW, LYB, EMN
Less rail traffic from Bakken is net positive for coal, who’ve been hampered with those fucking rail cars filled with frac sand.
They also benefit from lower diesel expenses. ACI is 83% hedged with call options (idiots). ANR is 40% hedged for 2015. BTU is 65% hedged. Every $10 move in crude equals $12 mill in cost savings. CLD takes in $7 mill for every $10 move down to $70, then $5 mill below $70.
X may be fucked due to diminished demand for oil country tubular goods.
Financials who benefit from lower fuel: ALLY, AXP, DFS, SC.
Reduced shipping costs help AMZN.
LII, IR, WSO and SWK benefit from boost in discretionary spending, while DOV and ROK are fucked because 20% of their revenue comes from men with big hats who live in oil fields.
Bullish on refiners: MPC, VLO, TSO and WNR. They hate Canadian oil sands and do not like XOM, CRC and HK.
They are bullish on items sold at gas stations and trade ups at grocery: WWAV, HSY, MO, LO band RAI. Might I add, IMKTA, CASY, CST and COST have gas station exposure too. PTRY was another gas station play, but was recently acquired.
Healthcare: CVS, WAG, DGX, LH, ABC, MCK, CAH all benefit from poor people with more change jangling around in their pockets.
VAR has russian, middle east and latin american exposure.
PCAR, CMI, WBC, NAV, ALSN benefit from big ass truck demand, while CAT, URI, MTW and TEX suffer due to oil and gas exposure.
Lower oil means cheaper expenses for aluminum makers: AA, CENX, NOR.
FCX and TCK have exposure.
They like insurance names with little exposure to Houston, such as DRE, LPT and PLD. They hate EGP, MAA and ARPI for exactly that.
Again with the low end theme, Morgan favors restaurants who feed homeless people: TXRH, EAT, DRI, SONC and JACK.
Retail names that tend to do best: TSCO and WSM.
Specialty Retail: ARO, BURL, ROST and TJX.
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