Saudi Aramco

Considered one of the largest companies in the world in terms of revenue in 2021, Saudi Aramco, with headquarters based in Dhahran, is a public petroleum and natural gas company. Saudi Aramco is a leading producer of energy supplies and has seen its services expand worldwide. The company is also looking at green energy, with the intent to launch a Middle East Green Initiative aimed at reducing carbon emissions.

The company was founded in 1933, and its net revenue in 2021 exceeded $110 billion, increasing over 100% from their 2020 revenue of $49 billion. The company’s CEO, Amin H. Nasser, has been the CEO since September 2015.

How to Buy Saudi Aramco (TADAWUL: 2222) Stock

Because of regulations, foreign investment in Saudi stocks is limited, meaning that only investors and financial institutions with the deepest of pockets can buy shares in Saudi Aramco. So, for the majority of people, investing directly in Saudi Aramco isn’t possible.

However, some exchange-traded funds (ETFs) — such as the iShares MSCI Saudi Arabia ETF (NYSEARCA: KSA)  — hold the stock, so investors can gain exposure to Saudi Aramco by buying shares in them. To gain exposure to Saudi Aramco stock, follow the below steps.

Step 1: Pick a Brokerage

A broker acts as the intermediary between you and the stock exchange. The customer places an order via their broker to buy a stock or ETF, and the broker carries out those instructions. If you decide to purchase shares in an ETF that holds Saudi Aramco, you instruct your broker to buy the number of shares you request at the price you set, and it carries out those instructions. 

In return, the broker charges you a fee for its services. The fee varies depending on the broker, and investment advisors may charge their own fees. Therefore, it is vital to research costs and other aspects before setting up an account.

Step 2: Decide How Many Shares You Want

Once you have chosen a broker, you fund your account and decide how many shares to buy. Consider the amount of risk you want to take and the percentage of your account attributed to that investment. 

Starting with a small investment and adding consistently over time is a strategy used by many investors. However, before you make your purchase, consider how you will enter the oil market and speculate against both the market value of the firm and oil prices.

Step 3: Choose Your Order Type

This stage requires you to decide on how your position is executed. Different order types exist, but the primary 2 you need to know are market and limit orders. 

Market orders mean you acquire the shares at a price dictated by the market. Or, in other words, you buy at the current market price. Therefore, using market orders results in a high chance your order will be filled. 

Limit orders mean that the price you buy the stock at is decided by you. You can determine what price you buy the shares at, but you face the risk that the order won’t be filled if the price doesn’t hit your predetermined level. 

Step 4: Execute Your Trade

After you have completed the necessary steps to put you in a position to buy the shares, all that is left to do is just that — buy the shares. Once you have opened the trade ticket and completed the required fields, the last thing to do is click buy. Once completed, you can monitor the stock and your other positions by navigating to the correct tab on your brokerage platform.

Where to Buy Saudi Aramco

Here is a list of brokers that allow you to buy ETFs with Saudi Aramco exposure that allows you to invest in oil production, the crude oil market, prevailing energy prices and petroleum products.

Saudi Aramco was publicly listed on the Saudi Stock Exchange on Dec. 11, 2019, at an opening price of SAR35.20. The company’s stock price has moved mostly sideways since the start of 2021, as the oil and gas industry shook in the wake of the COVID-19 pandemic.

The firm's share price showed improvements after reaching highs of SAR38.30 on October 31, reaching its highest since the end of 2019. A recent drop in the last month means it is back around the levels it opened the year at. At the time of writing, the stock has fallen 5.6% in the last month. 

The gain in share price is attributed to recent strong earnings from the company. Higher crude oil prices caused its best quarterly earnings since December 2019, with net profit more than doubling. Net income jumped from $11.8 billion in Q3 2020 to $30.4 billion in Q3 2021. 

The company was boosted by oil prices, with global crude futures climbing 4.5% in the quarter after the decision from OPEC+ to maintain its output increase rather than raising it on supply concerns. Refiners are flowing more freely as of the summer of 2023, and the Saudi Arabian owners of the business are hoping that oil prices will continue to rise along with inflation.

Saudi Aramco: What Analysts Are Saying

Because of the stock not being widely available for most investors, it is not surprising that analyst coverage is difficult to source. However, according to an article on Fortune.com, of the 17 analysts covering the stock, there is 1 buy rating, 1 sell, and 15 holds.

Bernstein Bear Case

Within that same article, Bernstein outlined a somewhat bearish case for the stock. Aramco’s dividend yield was described as uninspiring by Bernstein, with the firm saying the company repays unremarkable returns for investors. 

The investment management firm said that despite having great operating metrics it continues to see better value elsewhere, downplaying Aramco’s dividend yield in comparison to competitors and emerging energy stocks.

Bernstein had an “underperform” rating on the stock in August.

BlackRock Bull Case

A recent pipeline network deal gained positive comments from BlackRock Real Assets, a key player in the $15.5 billion lease-and-leaseback deal.

As referenced by Reuters, BlackRock CEO Larry Fink stated that Saudi Aramco is looking at meaningful steps to transition toward renewables, clean hydrogen and a net-zero future. Its responsibly managed natural gas infrastructure has a significant role in the transition.

The positive comments add to Aramco’s increased focus to become net zero-carbon by 2050.

Pros and Cons of Saudi Aramco

Pros:

• World’s largest listed company: Being one of the largest firms in terms of market cap in the energy industry, it is difficult to ignore and will gain genuine interest, as it has been such a profitable firm for a long period of time.
• Recent deal: Aramco signed a $15.5 billion lease-and-leaseback deal of its gas pipeline network, led by BlackRock Real Assets, on Monday. A rebound in crude prices has helped attract investors.
• Finances: The firm has solid finances with a strong balance sheet and low costs, especially on production. Its finances are helped by the massive amount of oil reserves in Saudi Arabia and the fact that it is the largest oil producer in the world.

Cons:

• Regulation: Directly purchasing shares of Saudi Aramco is virtually impossible for retail investors due to the regulation from Saudi Arabia.
• Environmental governance: A strong argument against a company such as Aramco is that it relies solely on fossil fuels. Government intervention has developed in recent years in order for businesses to become ethically and environmentally conscious and look towards sustainable practices in the future.
• Geopolitical events: Events such as the drone attacks on Aramco oil facilities in 2019 can scare investors away, as the energy market is quite susceptible to market fear and selloffs.

Is Saudi Aramco a Buy, Sell or Hold?

Aramco has had an impressive year, and its market capitalization is a significant indicator, currently just below Apple Inc.’s (NASDAQ: AAPL) at $2.41 trillion but above Alphabet Inc.’s (NASDAQ: GOOGL) $1.47 trillion valuation. When the company first became public, excitement over the world's biggest IPO was apparent. However, 3 years later, that same excitement has turned stale. The climate crisis miht cut into oil profits, but climate change will not shut down such a vital industry.

Despite impressive profits, pushes in green energy, or new deals, the oil giant’s share price continues to remain relatively mute, barring the October climb. With current oil prices showing strong growth in the last year, Aramco has struggled to follow its lead. 

A hold on the stock seems like a safe indication at this current time. Uncertainties over the current state of the global economy makes oil demand unpredictable. However, if travel reaches pre-covid levels and the world can get back to some form of pre-covid normality, an argument for growth in these crude oil stocks may be difficult to go against.

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