Energy and gold stocks are attracting investors' attention in the midst of Silicon Valley Bank's lightning-fast meltdown and related financial turmoil. They suspect there will be another leg down, especially if the Federal Deposit Insurance Company (FDIC) does not guarantee all of SVB's deposits.
Complaints About FDIC Inaction on Non-Insured SVB Deposits Stoking Fears
Some, like hedge fund manager Bill Ackman, are saying the many non-SIB (strategically important banks) could face a run on Monday, March 13. He is quoted on Twitter as saying,
“From a source I trust: SVB depositors will get ~50% on Mon/Tues and the balance based on realized value over the next 3-6 months. If this proves true, I expect there will be bank runs beginning Monday am at a large number of non-SIB banks. No company will take even a tiny chance of losing a dollar of deposits as there is no reward for this risk. Absent a systemwide @fdic deposit guarantee, more bank runs begin Monday am.”
Moreover, Mark Cuban was quoted as saying on Twitter:
“The Fed should IMMEDIATELY buy all the securities/debt the bank owns at near par, which should be enough to cover most deposits.”
"If the Fed doesn’t own it, trust in the banking system becomes an issue…There are a ton of banks with more than 50 pct uninsured deposits."
As a result, investors are looking more eagerly at other non-financial stocks.
Oil and Precious Metals Stocks Moving Higher
The oil price is up almost a dollar to $76.68 late on Saturday, March 11, 2023. That is over 1.27%, in contrast to most financial stocks which have fallen. The price of gold was also up $36.20 to $1,867 per ounce.
Many oil and gas stocks are now up post-market on Saturday, March 11. In addition, investors are likely to look at non-financial sectors like gold and energy on Monday when the markets open up.
Meanwhile, investors are also paying attention to stocks that have recently raised their dividends as well as buybacks. For example, I recently wrote that American Express Company (AXP) recently hiked its dividend by 15% and increased its buyback program to 120 million shares or 16.1% of its total shares outstanding.
In addition, Suncor Energy (SU) raised its dividend by 23.8% and said it would buy back up to 10% of its shares over the next 12 months. Similarly, Phillips 66 (PSX) recently hiked its dividend by 8%. It also announced a huge increase in its buyback program by $5 billion.
Another example is Occidental Petroleum (OXY) which jacked up its dividend by 38% on Feb. 27. It also reauthorized a $3.0 billion goal for its buyback program this year. Those buybacks represent 5.56% of its total $53.9 billion market cap. So, along with its 1.20% dividend yield, the stock now has a total yield of 6.76%. That is not easily ignored by value investors seeking a place to land in the midst of financial turmoil caused by a bank failure.
More Stock Market News from Barchart
- Stocks Slump on Contagion Risk from the Silicon Valley Bank Collapse
- Stocks Weighed Down by Bank Jitters
- 3 Reasons Why the Bulls May be Targeting Coursera (COUR)
- Markets Today: Stocks Rally as Concern Eases About Aggressive Fed
On the date of publication, Mark R. Hake, CFA did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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