Elliott Gue
Elliott Gue is cofounder of the investment-publishing company Capitalist Times, McLean, Virginia, and co-editor of the Energy & Income Advisor newsletter. CapitalistTimes.com
To see the big picture about where the economy and certain stock market sectors might be heading, it pays to follow certain “indicator” companies.
Elliott Gue never misses the quarterly earnings calls of some influential firms because they are packed with insights. The CEOs don’t just explain their businesses’ financial statements and projections. They also provide forecasts about trends in their industries and even in the economy overall. Two of Gue’s favorite indicator companies to follow…
SLB Limited (SLB). Formerly known as Schlumberger, the century-old oilservices firm is the largest in the world with operations in more than 120 countries. SLB management has a catbird seat for the entire oil-and-gas industry thanks to its exposure to almost every aspect of the process, including exploration, well construction, production, deep-sea drilling and numerous related end markets such as emission reduction and hydrogen and geothermal production. InvestorCenter.slb.com
What SLB executives are saying now: We still are in the middle innings of a multiyear super-cycle in oil supply and demand, which could keep prices elevated through the end of this decade. Reason: Oil prices collapsed during the pandemic. Demand has since bounced back to all-time highs, and energy majors and OPEC producers have invested tens of billions of dollars in additional exploration and production. But it will take years for that new supply to come to market. Higher oil prices have made energy stocks the best-performing sector of the S&P 500 over the past three years, up an annualized 29%.
Walmart (WMT). No single company is in a better position than the Arkansas-based retailer Walmart to forecast trends in consumer spending, which accounts for 70% of the nation’s gross domestic product (GDP), the primary measure of the size of the US economy. Some relevant numbers: 90% of all Americans live within 10 minutes of a Walmart… the average Walmart sells more than 140,000 individual items…and 36 million people shop there each day (the equivalent of the entire population of Canada). Stock.Walmart.com
What Walmart executives are saying now: Inflation has receded over the past year, but it’s biting Walmart consumers harder than government data suggests. The stores are benefiting from the “trade-down effect”—shoppers who make more than $100,000 a year were among Walmart’s biggest contributors to market-share gains in the most recent quarter. Once inflation gets out, it’s very hard to eradicate. The stock market has spiked because of hopes that the Federal Reserve is poised to aggressively cut interest rates. But I would not celebrate too soon—the Fed hasn’t won the battle against inflation yet.
