The Seven Group Holdings Ltd (ASX: SVW) share price climbed 2.07% yesterday after Beach Energy Ltd (ASX: BPT) saw its share price reach a record high on the back of higher global oil prices.
What drove the Beach share price higher?
The Organisation of the Petroleum Exporting Countries (OPEC) and its oil-producing partners decided to cancel a planned meeting for April which will leave existing supply cuts in place until at least June. These cuts have thus far pushed oil prices higher despite increasing trade tensions and Saudi Arabian Energy Minister Khalid al-Falih indicated that the cartel may need to leave the cuts in place until the end of 2019.
The two most commonly-referenced oil benchmark, being Brent crude, rose 23 cents to $67.39 per barrel to approach last week's year-to-date high of $68.14. The other common oil benchmark, U.S. West Texas Intermediate (WTI) crude rose 14 cents to $58.66 per barrel in a sign of further supply-side shocks boosting the oil price higher.
As a leading Australian oil and gas exploration company, Beach has seen its share price surge more than 60% in 2019 alone on the back of lofty east coast gas prices at $9 – $10 per gigajoule (GJ) and the sustained global oil prices.
What's that got to do with the Seven share price?
Seven Group, through its wholly-owned subsidiary, Network Investment Holdings Pty Limited, holds a ~70% majority stake in Beach Energy. Seven recently increased its stake even further, purchasing a further 68 million shares in mid-November to take its total outstanding position to over 650 million shares.
Seven has diversified away from its media roots in recent years into core areas such as mining and energy, and if it continues its recent run of form it could go even higher.
Is the Seven Group a Buy?
The Seven Group share price rose more than 22% in February alone, buoyed by a solid earnings season and Beach's continued share price resurgence, with the Aussie energy company up more than 60% year-to-date.
Despite Seven's ongoing diversification, I think they might be subject to significant headwinds as growth continues to slow and any slump in Beach's performance and profitability could hit shareholders of Seven particularly hard.
Seven currently offers investors a dividend yield of 2.30%, which certainly isn't the worst in the sector, but its P/E multiple of over 20 would make me wary of investing at this point in the cycle.
For those who are similarly bearish on Seven, I'd be checking out these top growth shares that have been tipped as market beaters.
