Technology stocks have suffered a series of setbacks since 2022, while energy stocks, which benefited from energy gains, have been favored. For Wall Street, oil and gas stocks are the new FAANGs.

A considerable number of investors, including Buffett, who has been hailed as a stock god, believe that energy prices (especially crude oil prices) will continue for some time. At the end of 2021, oil prices were around $75. Oil prices skyrocketed in 2022, almost doubling from 2021 levels, and are currently hovering around $100. Energy stocks have been the best performer in the S&P 500 so far this year.

Shares of Occidental Petroleum (OXY.US), Buffett’s growing holding, doubled, making it the top performer on the U.S. stock index. The $SPDR Energy Index ETF (XLE.US) is up nearly 40% this year. $Valero Energy (VLO.US)$ , $Marathon Oil (MRO.US)$ , $Halliburton (HAL.US)$ , $Hess (HES.US)$ and $ExxonMobil (XOM ) .US)$ is also a big winner.

Occidental Petroleum announced its earnings report for the first quarter of 2022 after the U.S. stock market on Tuesday. The data showed that the company made a profit of $4.876 billion in the first quarter of 2022, and a loss of $146 million in the same period last year, turning losses into profits; total operating income was 8.349 billion USD, a year-on-year increase of 58.0%.

So now who else thinks of the big tech stocks represented by the FAANGs? How beautiful it used to be, how “lonely” it is now. This will be the era of energy stocks like oil and gas. This year, the oil and gas company $Diamondback Energy (FANG.US)$ has risen by nearly 25%. In contrast, the extremely popular $Netflix (NFLX.US)$ , whose stock price has plummeted by more than 70% since the beginning of the year, is the highest in the S&P 500 index. worst-performing stock. Another $Meta Platforms (FB.US)$ (previously known as Facebook), which is only supported by the Metaverse, has also fallen by more than 40% year-to-date.

But is it too late to start betting on energy stocks? The energy sector remains incredibly volatile, and short sellers are ramping up bets on energy stocks, hoping to profit from the potential for further price declines. Oil stocks were the biggest market losers on Monday when the Dow fell more than 650 points.

At least so far, many investors also believe that inflation is not going away immediately. The Federal Reserve is raising interest rates, which could support oil prices for the foreseeable future, and energy stocks and other commodity-sensitive sectors are likely to lead the market for a while, just as Big Tech has done for the past decade.

Crude producers, oil rigs and other companies with exposure to energy production don’t have to worry about profits as long as oil prices remain relatively high. The energy sector is expected to witness unprecedented earnings growth in the first quarter of this year, Wade Fowler, senior portfolio manager at Synovus Trust Company, said in a report last week.

Can oil and gas stocks continue to outperform tech stocks?

For the U.S. oil and gas sector, it can also reap the benefits of the Russian-Ukrainian conflict. U.S. energy companies are poised to benefit from many European countries currently cutting Russian oil supplies. “Markets expect Europe to increase its reliance on U.S. energy supplies, which will benefit the U.S. energy industry,” analysts from Morningstar’s quantitative research team said in a note late last month.

Energy stocks currently make up only a fraction of the overall market, accounting for about 4.4% of the S&P 500, according to Bespoke Investment Group. Despite the recent plunge, tech stocks still make up about 28% of the index. The oil industry has a long way to go before it catches up.

The gap should narrow further, and investors shouldn’t rule out energy stocks regaining greater leadership in the broader market, Bespoke noted in a recent report. Analysts noted that after the tech crash in 2000, energy stocks ended up being equally weighted as tech stocks until 2008.

Morningstar Quantitative research team wrote: “We are not saying that energy will go hand-in-hand with technology as it did in the mid-2000s, when commodities saw a massive bull market after the Internet crash. But it is certainly not impossible.”

In addition to investing in Occidental oil companies, Buffett has also made big bets in the oil sector. Oil giant Chevron (CVX.US) is the top performer on the Dow this year and one of Berkshire’s four holdings. As far as Buffett is concerned, the position on both energy and technology is clear. Berkshire Hathaway now owns a stake in Chevron worth $25.9 billion, up from about $6 billion at the end of the fourth quarter. Second only to the company’s top three holdings Apple, Bank of America and American Express.

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