Oil Stocks In “Death Knell Phase” According to Stock Market Pundit Jim Cramer


On Friday, during the show “Squawk Box,” CNBC Market Analyst Jim Cramer compared oil and other fossil fuel stocks to “the stigma attached to investing in tobacco companies” as shares of both Chevron and Exxon both fell in early trading Friday after announcing quarterly results.  According to Cramer, young people’s views are having an impact — “This has to do with new kinds of money managers who frankly just want to appease younger people,” Cramer said. “We’re starting to see divestment all over the world.”  And from the Big Ten to the Ivy League, universities are becoming a focus of divestment efforts — student leaders from across the Big Ten Conference last weekend called on their institutions to begin divesting from fossil fuels, representing 500,000 undergraduate students across 14 institutions.

Why This Matters:  We are reaching a point where a consensus of public opinion — particularly young people who are pressuring their elders to change — is that fossil fuel stocks are bad investments, not just bad for their impact on climate change.  When BlackRock announced its intention to divest, that was a huge signal to investors that its time to change strategies and put investment dollars into more sustainable businesses.  And these big fossil fuel companies are not performing financially — missing their earnings targets is bound to dampen investor enthusiasm and may even trigger more sell-offs.  Not to mention the increasing success of divestment efforts to generate bad publicity for holding onto fossil fuel stocks.

Poor Performance By Oil and Gas

One of the issues is that fossil fuel companies are not diversifying their energy portfolios fast enough and their stocks are losing value.  Both Chevron missed revenue expectations, as well as Exxon’s lower earnings per share came in below what analysts expected.  One of the biggest problems is the glut of oil and gas on the market today causing consistently low prices for oil and natural gas. However, CNBC’s Cramer also explained that even if oil and gas companies hit their numbers, he thinks the stocks will not turn around.

Student Divestment Movement

Students are on the leading edge of a movement to get large universities to divest their endowments.  For example, the Michigan Daily reported last week that the university’s Central Student Government released a statement on Jan. 26 announcing that they passed a resolution demanding the University freeze all of its fossil fuel investments and commit to divestment in 2020.  A similar student ballot initiative is going to a vote of the student body later this week at Georgetown University.  And a group of young alumni at Harvard called Harvard Forward made a very public statement by hand-delivering thousands of signatures to nominate young alumni to be on the ballot for the Board of Visitors for the purpose of working for divestment.  Universities in the U.S. are being pressed to join other large institutional investors like the World Bank and the American Medical Association, and other schools like Queens College, Cambridge, and Middlebury College and divest.  And now faculty are joining in — the Harvard Faculty of Arts and Sciences will debate a motion that advises Harvard to divest its endowment from fossil fuels at its monthly meeting today.

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