Chevron And Bank Of America: The 2 Best Out-Of-Favor Stocks

Energy and financials have been the worst-performing sectors during this pandemic. But these two out-of-favor stocks are worth buying.

Buy low, sell high. That’s the basic idea, isn’t it? In order to do that, you need to buy stocks when they are on sale and sell them when they are flying high. In other words, you buy a stock when nobody wants it and sell it when everybody wants it. That’s easier said than done.

Stocks usually go out of favor for good reasons. Business stinks and probably won’t get much better in the foreseeable future. Who wants to own a stock like that? But these out-of-favor stocks and sectors are an ideal place to find companies with great businesses at fire-sale prices. Business will inevitably improve for the very best of these companies. It’s just a matter of when.

The current market offers many such opportunities right now. Sure, the market indexes have staged an epic rally from the March bottoms. In fact, the Dow and the S&P 500 is not all that far from an all-time high. The technology-laden NASDAQ index just hit an all-time high. But these indexes can be misleading. Many stocks have been left out of the rally and are still wallowing in bear-market oblivion.

Of the 11 S&P 500 market sectors, the worst performers so far this year are by far Energy and Finance. In fact, these two sectors have been the worst performers on the index for the past one-year, three-year, and five-year periods as well.

These are cyclical sectors that don’t do well in a recession. Oil prices crashed as demand for energy fell off a cliff during the pandemic lockdown. The industry was already grappling with an unfavorable supply/demand dynamic and the price crash was another kick in the head. It’s been ugly for banks as well. Interest rates again crashed to new all-time lows and loan demand plummeted during the recession.

But the economy will still need oil and gas. It will power the recovery. Banks have a crucial role in the economy and will surely find a way to prosper as the economy recovers. In fact, the market is factoring in a booming economic recovery in the quarters ahead. If that comes to fruition, circumstances should greatly improve in these two sectors in the not-too-distant future.

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William K. 3 months ago Member's comment

VERY INTERESTING about Cheveron Petroleum. Certainly the details about the financial ends. THANKS.

Alpha Stockman 3 months ago Member's comment

Nice find on $BAC and $CVX, I wouldn't have thought of these stocks.