A rise in Covid shutdowns internationally, combined with concerns over vaccine safety, may point to a prolonging of a full economic reopening. In any event, the past few weeks have caused a pullback in a number of recently high-flying names.
One of those areas is energy. While the sector is still up strongly for the year, the sector as a whole peaked in mid-March and has come back down. It’s starting to look like a solid entry point for long-term investors.
For instance, shares of energy giant ExxonMobil (XOM) are down over 12 percent from their 52-week highs set a month ago. That’s into correction territory, and shares are still well under their pre-pandemic prices. The pause looks set to continue.
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In the meantime, sharply rising oil prices in the past few months have allowed the company to maintain its now-hefty 6.5 percent dividend yield, and shares trade at 18 times forward earnings, a reasonable value compared to the S&P 500 as a whole.
Action to take: Investors may like shares here for the historically high dividend, in addition to capital gains going forward.
In the short-term, shares look due for a pop higher. The June $60 calls, trading for about $1.05, offer mid double-digit gains in the weeks ahead as a quick trade on oil prices seeing a modest rebound.
Disclosure: The author of this article has an options in the stock mentioned here, but has no intention of changing or starting a new position in the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.