It's a Tough Time to Be in the C-Suite, Good Time to Be in a Gas Field
13 March 2020 - 10:29PM
Dow Jones News
By Paul Vigna
The second week of March will be remembered as the one that saw
the longest bull market on record end. The coronavirus epidemic
morphed into a pandemic, businesses were left reeling, and
investors were lost in a sea of red.
On Thursday, the Dow Jones Industrial Average suffered its worst
one-day loss since Black Monday in 1987. It is down 26% this year.
U.S. crude oil is down 48% over the same period. Gold is up, but
copper, a bellwether commodity, is down more than 11%. Treasury
bond yields are actually up for the week, though too little to give
equities investors any comfort.
It was a week of almost nothing but losers, but there were a few
winners as well. Let's take a look.
Winner: Gas Companies
There are only a handful of companies whose shares are up over
the past month, and the reason is obvious. Regeneron
Pharmaceuticals Inc. is working on a possible coronavirus
treatment.
For Campbell Soup Co., people working from home, or sick at
home, will be eating at home. The same theory applies for Take-Two
Interactive Software Inc.: Those at home will have more opportunity
to play games.
Then there are the natural gas companies. You might think in a
week that saw the oil market crater, there wouldn't be any winners
anywhere in the energy industry. But shares of companies like Cabot
Oil & Gas Corp., Southwestern Energy Co. and EQT Corp. are
rising.
Saudi Arabia's oil-price war is going to hurt U.S. oil
companies. This is, somewhat ironically, good for natural gas
companies.
Production of both oil and natural gas is expected to drop. But
demand for natural gas isn't expected to fall. The result is likely
to be a squeeze that would push prices higher. In the current state
of world affairs, there are precious few industries that look to
have pricing power.
EQT is up 18% this month, despite the worst equities selloff in
more than a decade. Cabot is up 15%. Southwestern Energy is up more
than 4%. Another natural gas producer, CNX Resources Corp., is down
only 1%.
While the ultimate outcome of the oil-price fight isn't yet
clear, "gas should be a safe(r) harbor than it is currently being
valued," Bernstein analyst Jean Ann Salisbury wrote in a research
note.
Loser: Managements
Just about everything and everybody in the market was a loser
this week. The bull market is dead. Investors are being hit with
wave after wave of selling. The corporate debt markets are roiling.
The fears of a recession are climbing.
But there is one group that seems to be under acute pressure:
management.
With companies scrambling to protect themselves from the
economic fallout of the coronavirus pandemic, CEOs are under
scrutiny.
Occidental Petroleum Corp. has been one of the hardest hit
stocks in the S&P 500, down 64% this month alone. Damaged by
the new price war in the oil market, the company was forced this
week to cut both spending and dividends.
Now one of the company's most famous, and disgruntled,
shareholders is coming after management. Carl Icahn ratcheted up
his long-running fight with the company this week, disclosing that
he now owns nearly 10% of the company's stock. With that position,
he is demanding big changes: He wants to unseat the entire board
and then get rid of Chief Executive Vicki Hollub.
Occidental isn't the only company fielding angry calls from its
shareholders.
GameStop Corp. is under pressure from an investor group that
owns about 7.5% of the company's shares. The group, which includes
Hestia Capital Partners LP and Permit Capital Enterprise Fund LP,
has been agitating for change for a year. They, too, are ramping up
their campaign.
Even after GameStop appointed three new independent directors
just this week, the group still wants its own representative on the
board. They aren't happy with the company's performance and want
their voices heard.
Elsewhere in C-suite news, United Parcel Service Inc. and
Tupperware Brands Corp. both named new CEOs Thursday. Those are the
latest in what has been a wave of change at corner offices since
Robert Iger stepped down at Walt Disney Co. just over two weeks
ago.
Next Week: Another Rate Cut?
There are very good reasons to question how much impact the
Federal Reserve can have on the current situation. Even Fed
officials have made the point. But they aren't powerless, which
means the biggest event next week is the two-day meeting, March
17-18, of the Fed's rate-setting committee. On Wednesday, there
will be a statement and a press conference with Chairman Jerome
Powell.
The market is betting heavily on another interest-rate cut. Look
out, also, for any surprises, like Thursday's surprise liquidity
announcement, between now and then.
Write to Paul Vigna at paul.vigna@wsj.com
(END) Dow Jones Newswires
March 13, 2020 07:14 ET (11:14 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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