A dynasty is falling…
What was once the biggest name in the market is being dethroned.
In a turn of events, there’s been an unexpected shake-up in the Dow Jones Industrial. After 92 years, Exxon (XOM) has been ejected from the DOW benchmark index. This index manages 30 large companies, measuring their performance. And after joining in 1928, XOM is being pushed out, making way for Salesforce (CRM). The decision was made to balance out the disruption from Apple’s 4-to-1 stock split, which takes effect next Monday.
Exxon was once the world’s most valuable public company – so, this is a symbolic event. And it speaks loudly to the fact that the oil and gas sector is shrinking, growing less and less powerful every day. And this isn’t a new fact – XOM shares have plunged nearly 40% this year as crude prices have continued to fall due to the pandemic.
But there’s an even scarier reality once XOM is removed and it’s not painting a pretty picture for the oil sector and those invested in it.
Where’s the money?
Things looked a lot different 20, even ten years ago, but the oil and gas sector has been on a slow decline for a while. And with XOM’s removal, Chevron (CVX) will be the Dow’s only oil and gas company. And this is very symbolic of how far the energy sector has fallen over the past several years.
The industry has been under immense selling pressure over the past six years – so this downward spiral isn’t shocking, but I will say that it proves one thing – this isn’t your grandparent’s stock market, and you shouldn’t be trading it like it is.
And here’s how you should play the fall of what used to be one of the most potent stocks in the market…
How can I get some?
It’s been a trend that has been common lately – seeing sectors that used to dominate getting overtaken by new ones that will dominate going forward. But it doesn’t make XOM’s removal any less shocking seeing that this stock has been a leader for almost 100 years.
And I believe that we’ll continue to see oil and gas fall as alternative energy sources become more and more popular – leading the push for a cleaner, greener world. And this trend isn’t going anywhere anytime soon.
So, how would I play it? Simple. Invest in sectors showing growth potential – including renewable energy and the. Specifically, I am looking at XLK for an excellent play on the booming tech industry as more and more businesses shift gears to a “work from home” structure. And if you’re like me and looking to turn a profit on a sector’s unfortunate press – I would also look to short XOP. There’s some untapped potential waiting that I thin could pay out big.
In the spotlight: Best Buy’s knockout earnings
On Tuesday, Best Buy reported earnings, revealing strong second-quarter sales growth. And it was no surprise when we learned that the main culprit of these sales was an increase in online sales. Consumers bought computers, kitchen appliances, and other tech to improve their quality of life while stuck at home.
Due to an influx of consumer traffic and more people converting from browsing to buying – online sales shot up 242%. But it wasn’t just online sales garnering traffic – in-store purchases also grew by 5.8%, much higher than Wall street’s expected 2.3%. The growth of same-store sales was the highest in two years, even though stores were open by appointment only for the first six weeks of the quarter.
With this said, shares still fell more than 6% after the news as many investors wonder if Best Buy can uphold this type of growth. But with retailers returning to stores and browsing once again, positive trends have been the norm. So, I see a possible short-term opportunity on this retail stock, and I’ll be sure to keep you updated as this develops.
Yet Another Reminder…
The developments with XOM and the oil and gas sector in general are just another reminder of a rapidly changing landscape.
But Best Buy’s growth and adaptation still proves there is plenty of money to be made in these uncertain times…
You just need to know where to look – or have a computer algorithm do the work for you!
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