What Happened to the SXY Share Price? Senex Energy Ltd [ASX:SXY]...

What Happened to the SXY Share Price?

Senex Energy Ltd [ASX:SXY] was flat today. By 1:28pm, the stock had reversed a declining trend in the morning and recovered to the previous day’s trading price. The stock traded at $0.31 a share. The Aussie market on the whole was stronger on the back of solid gains from Wall Street overnight. Today, market participants are highly focussed on the release of the RBA minutes. Investors are trying to ‘sniff out’ any clue of potential rate cuts.
Why Did This Happen to SXY Shares?

‘Bearish oil’ is back in force and oil prices may very well test the bottom again. Fundamentals are weighing on oil prices as we speak. Right now, oversupplied inventories are punishing traders with a long positions in energy.
That, of course, has a direct implication for the stock price of Senex Energy. The company’s stock price was driven down by the oil price last year, and it continues to be dictated by the price of energy.
This scenario actually makes everything very simple for investors. Forget popular buzzwords such as ‘contrarian’ or ‘momentum’. What really matters here are the fundamentals, both in a macro sense and a company sense.
The fundamental reality is that the energy price is demand-driven in the long run, and it is skewed by supply growth in the short to medium term. Right now, we have relatively weak demand and a strong supply side.
Long term investors can swallow the fundamental reality relatively easier. It is going to take time for oil to recover. When demand recovers and supply comes down, that is when prices will rise. It will also drive the price of SXY.
What Now for SXY?

Market analysts have a consensus view that the company will ‘outperform’ in the future. Most believe its revenue and earnings will increase.
The financials of the company tells us the company is of high quality as well. Senex Energy has a low cost structure, and it has a low level of debt. That can only mean one thing — greater profitability, making SXY a financially attractive company in the energy sector.
If investors are to take a guess at the oil price, they can think in this way. The energy price is one of the key determinants of inflation in the world. Can you imagine a world without inflation? Can energy prices get consistently cheaper and go to zero? The answer is ‘no, it cannot’. That is why the downside risk is limited.


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