Goldman Sachs Lists 9 Sectors Benefiting From Falling Oil Prices
David Kostin of Goldman Sachs published a report last week titled "Denial, Anger And Acceptance of Lower Oil Prices."
"Investors are still stunned by the 30 percent plunge in oil prices since June," Kostin wrote. "Everyone has come to accept the idea that crude prices will remain low for years."
Kostin and his team of analysts list several sectors that benefit the most from falling oil prices.
- Apparel and Footwear companies will benefit from lower from lower COGS for vendors in the space. Retailers, especially those that target the lower-end consumer will benefit from its customer base having a larger disposable income.
- Auto manufactures benefit as consumers may upgrade to larger vehicles that sell at higher margins. Auto suppliers benefit as well from lower input costs for fabrics and synthetic rubber.
- Beverage sellers have historically outperformed other groups during periods of large oil declines, as its customer base benefits from higher discretionary spending and the company benefits from lower fuel costs for its transportation fleet.
- Building Products companies may see a short boost as input costs into carpets and some resilient flooring are lower. However, a lower oil price may result in pricing pressures and deflation for the final product.
- Consumer Durable companies benefit the most from lower Resin costs, which is a petroleum derivative and represents approximately 10 percent of cost of goods sold for certain firms.
- Cruise providers benefit from lower fuel costs which reduce expenses for the trip. However, companies still have to concern themselves with foreign exchange impacts.
- Food companies benefit from lower input costs for plastic packaging and lower fuel costs for their transportation fleet.
- Food Retail companies (i.e. traditional grocers) that cater towards the low to middle income consumers will see the most benefit.
- Homebuilders will benefit could benefit the overall economy as the impact on oil and energy price declines include job creations.
The United States Oil Fund LP (ETF) (NYSE: USO) was recently down 1.2 percent at $28.34 on Tuesday.
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