Of all the sectors that have disappointed investors, energy has to come near the top. Energy producers collapsed in 2008 and have never been able to catch a break since. Whenever performance improves as in 2013 and 2018, a new whirlwind of bad news arrives bringing oil prices to new lows.
As crude oil crashed to $20/barrel (87% below its $147 2008 peak), energy companies saw their stock price collapse in a move of total-capitulation by investors. Take a look at the iShares Global Energy ETF (NYSEARCA:IXC):
As you can see, the ETF crashed to nearly all-time lows and saw its TTM dividend yield rocket to 15%. The fund's weighted-average TTM "P/E" has declined to 11.4X and is trading 15% below its weighted-average book value. If you used earnings at higher oil-price times, its "P/E" ratio would likely be a bit lower.
Without a doubt, these companies are in a very difficult period where the majority are unlikely to turn a profit this year. One issue is crude being in the $20-30 range where essentially no major public companies can produce it profitably. The other is the fact that many of these companies are reliant on large labor forces that will likely drop over the coming months as COVID spreads around the world. Undoubtedly, this will bring many companies that lack ample liquidity to the brink of bankruptcy, but the majority are likely trading at a discount.
A Closer Look at IXC
IXC invests in the largest energy companies from around the world. These include the likes of Exxon (XOM), Chevron (CVX), and France's Total (TOT). Since these are the world's largest companies, most are situated in developed nations with higher costs of production. Further, most are integrated oil & gas firms that have more diversified operations than others.
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