28 Apr 28th April 2026

Markets Year to Date

We are in the height of Q1 earnings season and so far it has been a ripper. According to data from FactSet so far 28 percent of companies have reported and

• 84 percent have beaten expected earnings. That rate is a fair bit higher than the average and shows corporate America is running hot.
• At the sector level, Energy, Health, Real Estate and Utilities have all exceeded expections. In the Technology 93 percent have beaten (can you see why I say concentrate on this sector?)
• 81 percent have beaten revenue. That is also a fair bit higher than average.
• This is the key, based on what has been reported so far and the forecast for what will be reported by the rest of the companies, S&P500 earnings growth is forecast to be +15.1% for Q1.

Let that last point sink in. Earnings are set to come in 15.1% higher than the same quarter of last year.

That is a huge number and explains why the market is going higher and higher. But it gets even better

Margin expansion is an underappreciated reason for stock price increases. To understand why, consider this.

You buy two companies and each makes $100 in revenue. The first one has a 10% profit margin so that converts into $10 of profits. The second one makes a 20% margin which converts into $20 of profits.

The second company is better as it makes more profit from the same revenue.

But, if the first company could increase its profit margin to 15%, then the share price would increase because its profit would go from $10 to $15. And that increases in share price are what we want.

With that in mind, here is another chart from FactSet showing how profit margins now compare to the average of the last 5 years.

Six sectors are showing higher profit margins in Q1 verses their 5 year average. These are the sectors where business performance is improving. They are

Technology (again), Financials, Utilities, Communications, Industrials and Consumer Discretionary.

That is a broad cross section and tells us the macro environment is favourable to a lot of companies.

This Bull Market has some way yet to run.

How to Profit from a Higher Oil Price

We see on the news that Oil is up to $107 and then down to $96 etc etc. But this isn’t really true. The media are quoting the futures market as it is basically 24 hours a day and easily acceptable data. But true oil prices paid by refiners are much harder to get information about. I have no access. If you do and can let me know then please send me an email.

It does not appear the Strait of Hormuz will open anytime soon. Even if it does it might take years for the Oil markets to return to some level of normalcy.

So how do we profit from this?

The obvious choice is to buy the majors. Chevron (CVX), Exxon (XOM) et al.

But I think there is another, more profitable play here. And that is Oil Service Companies.

A history lesson first. In 1973 OPEC countries announced a ban on sales of oil to countries supporting Isreal in the Yom Kippur War. I suspect many readers will remember this well.

As a result France decided it never wanted its power supply to be held at ransom by another country again and embarked on a Nuclear Power generation program. Today it makes 70% of its power from Nuclear, has the lowest cost of power generation in Europe, is the largest exporter of power in Europe, has an excellent air quality and generates significantly lower greenhouse gases than other countries in Europe.

But our government thinks Nuclear is a bad idea.

Sorry. I got a little lost there. This isn’t about Nuclear. It is about countries wanting to not be dependent on other countries for Oil. That is what France did in 1974 because of an Oil Crisis.

We are hearing similar statements now in Australia from Senator Matt Canavan, Senator Susan McDonald and Senator Andrew Bragg.

It is fairly safe to assume other countries are thinking the same thing.

We have Oil here. But we need to get it out. To do so needs experts. Companies like Schlumberger, Transocean and Valaris.

This sector has been beaten down for a long time.

But something is changing and the current world environment is speeding it up.

With no investment in the sector for decades, it has seen consolidation. Today there are not that many companies out there that can do this stuff. If the voices saying drill for independence continue to shout about it, these companies will be able to set their price. And that will lead to huge profit expansions.

OIH is an ETF that holds just these companies and is an easy way to give yourself exposure to the Oil sector if you believe Oil could hang around the $100 a barrell mark.

Warning

Stock values can go down as well as up. It is possible to lose 100% of your investment in a stock. Any advice given by Capital 19 is general advice only and does not take your personal circumstances into account and might not be suitable for you.