Hold Tight on WDS

The resolve of WDS investors was tested during the week....thankfully the haemorrhaging eased yesterday and the stock actually had a green day after a couple of ugly red ones... would’ve been easy to panic and sell late Thursday/early yesterday.

Unfortunately it’s the macro environment that largely drives the price of oil and in turn the WDS share price.So as an investor in WDS we’re back trying to predict the macro future (ie. the tight supply argument versus the worldwide recession/demand destruction argument)

The latter argument took over this week (with new China lockdowns thrown in as well) and Brent, which started the week at $US105, looked like dipping below $US90 on Thursday. It steadied and has finished overnight on Wall st at $US93.

We’ve seen this all year. Things can flip on a dime. The Saudis have stated that they don’t want prices much lower than they are right now and have started talking production cuts.....throw in China lifting their lockdowns and some US data that begins to indicate interest rate rises are impacting and sentiment can change very quickly. The tight supply problem hasn’t been resolved. What happened this week can easily happen in reverse next week.

The US Fed has sent out a strong message that it is prepared to wear the risk of a recession to bring inflation down. They’re saying they intend to keep ratcheting up interest rates and this has supported the demand destruction argument all week.

However there are still plenty of financial commentators saying that once the Fed sees interest rates having a significant effect they’ll back off and won’t follow through on the intended increases. As soon as the market gets any sense of such a ‘pivot’ it will be off to the races again like happened a couple of months ago....which would support oil heading back towards $100.

But that’s all macro stuff.....

What has changed with this stock from last Tuesday is that the company now has the runs on the board as far as its ability to generate massive profits and shareholder returns while oil prices are $90 plus. Last Tuesday’s results were pretty impressive.

The updated metrics are now out there for all to see and should begin to come to the attention of US investors in particular. At $33.65 the WDS stock price will look cheap to some.







For me a firm hold right now with a big dividend to look forward to.