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Is the Origin Energy (ASX:ORG) share price a buy in this oil rally?

A string of positive announcements regarding potential vaccines has provided a shot in the arm to the unloved energy industry these last couple of weeks.

The Origin Energy Ltd (ASX: ORG) share price has been among the winners and is up more than 30% since the beginning of the month.

That said, Origin shares are still down around 35% from pre-COVID levels, so there’s definitely a way to go from here.

ORG share price chart

Source: Rask Media 1-year ORG share price chart

Origin’s COVID-19 disaster

The energy sector is a tough place to be with many various factors affecting the profitability of the underlying business. Origin operates through two main segments: Australian energy retail and liquified gas (LNG) export.

Electricity and gas retailing in Australia have been relatively stable through COVID-19, with sales volumes nearly in line with prior years. The underperformance is the result of Origin’s LNG segment, which is ultimately dictated by the historically-low oil price.

As the world economy recovers and oil demand increases, the company should see a lift in sales as it can charge more for its oil and gas exports.

Is the Origin share price a buy today?

I think this would depend on your overall investment strategy. As a short-term play, I could see the appeal in trying to capture some of this remaining upside as global oil demand gradually picks up. I don’t personally know how long this will take, but some analysts have estimated that in the fourth quarter of 2021, Brent crude futures could average US$53.30 per barrel (currently US$46).

The recovery may indeed be faster depending on the success of potential vaccines, but it’s still not an area I would typically invest in, especially with a long-term investment horizon.

Over the last 10 years, Origin has struggled to achieve any significant sales growth and earnings have been volatile with a general downtrend. Return on equity has typically been quite low over the long-term, so it’s hard to see how shareholders are going to do very well if the business can’t generate substantial returns from contributed equity.

Buy/hold/sell

I wouldn’t be a buyer of Origin shares at the moment. I’d rather invest in a business where the macroenvironment works with the company rather than against it.

One ASX share I’m really liking at the moment is Infratil Ltd (ASX: IFT). Infratil is an infrastructure investment company with some nice macro tailwinds that should give it a nice boost in years to come.

If you’d like to know more, check out my in-depth article on Infratil shares.

Is BNPL the opportunity of a lifetime or is the sector a ticking time bomb?

Rask's analyst has just finished a 7,500-word report, The Ultimate BNPL Sector Report, taking a deep dive into this booming ASX sector. It shines a spotlight on each of the major players. You can get the full analyst report for FREE by CLICKING HERE NOW or entering your email below.

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Afterpay, Zip Co, Sezzle…

Is BNPL the opportunity of a lifetime or is the sector a ticking time bomb?

Rask's analyst has just finished a 7,500-word report, The Ultimate BNPL Sector Report, taking a deep dive into this booming ASX sector. It shines a spotlight on each of the major players. You can get the full analyst report for FREE by CLICKING HERE NOW.

Note: the report is 100% free.

At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned

Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.

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Rask Media’s Ultimate BNPL Sector Report

Afterpay, Zip, Sezzle… is this the opportunity of a lifetime? Or is BNPL a ticking time bomb? This 7,500-word analyst report takes a deep dive into the BNPL sector and shines a spotlight on each of the major players in this booming market. 

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As we emerge from COVID-19, some tech companies are growing faster than ever. Rask’s investment analysts have identified 3 growth stocks set to benefit. Big time.

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