This high 1% guru simply warned of a potential 25% market plunge — and says the Fed will not tame inflation earlier than one thing ‘goes haywire.’ However he nonetheless loves 1 particular sector

Regardless of the inventory market’s current bounce, some consultants are in no temper to have fun.

In keeping with high fund supervisor Jeff Muhlenkamp, the outlook stays gloomy.

In an interview with Enterprise Insider, Muhlenkamp says that the S&P 500 may drop one other 20% to 25%.

He says that the Fed — which is elevating rates of interest aggressively to tame inflation — has “damaged a few issues already.”

“Frankly, I’ve no cause to count on something apart from extra breakage. I truthfully do not suppose the Fed’s going to get inflation below management earlier than one thing that they actually care about goes haywire.”

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Muhlenkamp is aware of a factor or two about surviving the present downturn. His Muhlenkamp Fund has overwhelmed 99% of its friends yr thus far in accordance with funding analysis specialist Morningstar.

Whereas the fund supervisor just isn’t bullish available on the market as an entire, he nonetheless sees alternative in a sector that has already carried out fairly nicely.

“Proper now, sadly, we aren’t seeing nice costs that trump our issues about what’s occurring on the nationwide financial stage, with the one exception being in power.”

Listed below are three of his favourite names within the area.

EQT (EQT)

EQT is a pure fuel producer within the Marcellus and Utica Shales within the Appalachian Basin.

Given how a lot pure fuel costs have gone up this yr, it’s no shock that EQT’s enterprise is firing on all cylinders.

The corporate simply reported earnings. In Q3, it achieved a mean realized value of $3.41 per thousand cubic ft of pure fuel equal, marking a 46% enhance from the $2.33 per Mcfe it earned within the year-ago interval.

EQT additionally churned out $591 million of free money stream for the quarter, an enormous enchancment from the $99 million generated in Q3 2021.

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Unsurprisingly, the corporate has acquired loads of investor consideration this yr — shares are up 80% to date in 2022.

EQT can also be returning more money to traders. Administration not too long ago doubled the corporate’s share repurchase authorization to $2.0 billion.

Occidental Petroleum (OXY)

Occidental Petroleum is an power firm with belongings within the U.S., the Center East and North Africa. Notably, it’s one of many main oil producers within the Permian and DJ basins and offshore Gulf of Mexico.

Occidental made headlines earlier this yr when legendary investor Warren Buffett loaded up on the corporate’s shares.

Learn extra: The US now has simply 25 days of diesel provide — the bottom since 2008. Here is why that is extra alarming than a dwindling ‘oil piggy financial institution’

Buffett’s Berkshire Hathaway backed up the truck on Occidental after the corporate’s earnings convention name held in late February. Buffett learn the transcript and appreciated what he noticed.

“We began shopping for on Monday and we purchased all we may,” he advised CNBC.

Afterward, Buffett purchased extra — much more.

In keeping with the newest SEC submitting, Berkshire now owns 194.4 million shares of OXY, value a whopping $14.1 billion. That makes OXY Buffett’s sixth-largest holding.

The inventory has surged 135% yr thus far, which is spectacular — even by power sector requirements.

Occidental will launch its Q3 earnings report on Nov. 8 after the closing bell.

SLB (SLB)

It’s not simply the producers that may profit from the power growth. Muhlenkamp additionally holds shares of oilfield providers supplier SLB.

In Q3, SLB introduced in $7.5 billion of income, representing a 28% enhance yr over yr.

Backside line progress was much more spectacular, as the corporate’s adjusted earnings got here in at $0.63 per share, up 26% sequentially and 75% from a yr in the past.

Shares have climbed a stable 63% yr thus far.

Observe, that SLB used to go by the title Schlumberger. The corporate modified to its present title on Oct. 24, reflecting its imaginative and prescient for a “decarbonized power future.”

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