Wall Street’s Venezuela winners go beyond Big Oil : NPR

Wall Street traditionally detests “uncertainty.” But in the first days after the United States removed Venezuelan President Nicolás Maduro from power, U.S. investors are shrugging off the geopolitical instability — and mostly focusing on the positive.

The Dow Jones Industrial Average hit record highs on Monday and Tuesday, lifted in part by some Venezuela-related stocks. The S&P 500 also closed at a record high on Tuesday. Meanwhile, investors who own Venezuelan bonds — including some large U.S. financial institutions — also saw those struggling assets surge in value.

“We’re in a different ballpark now,” says Eric Fine, who invests in bonds as emerging-markets portfolio manager at VanEck Funds, and whose investment firm bought Venezuelan sovereign debt a few weeks ago.

U.S. oil companies were the immediate, and stated, beneficiary of the country’s attack on Venezuela: President Trump said during a weekend press conference that U.S. oil companies would now be able to invest in Venezuela, to “fix the badly broken infrastructure, the oil infrastructure, and start making money for the country.”

Big Oil stocks have swung up and down since. Shares in Chevron, the last major U.S. oil company remaining in Venezuela, soared on Monday before retreating on Tuesday. Other oil companies and oil field-services providers — including Exxon Mobil, ConocoPhillips, and Halliburton — followed the same trajectory.

Another potential Wall Street beneficiary: Elliott Investment Management, a hedge fund founded by billionaire and influential Republican donor Paul Singer. A U.S. judge in November approved Elliott’s $6 billion bid to take over Citgo Petroleum, a subsidiary of Venezuela’s state oil company. Maduro’s government had denounced and appealed the sale, which has yet to be approved by the U.S. Treasury Department.

But the potential Wall Street winners from the United States’ dramatic intervention in Venezuela go far beyond oil. Here are some other U.S. investor groups that are benefitting:

Venezuela’s long-suffering bondholders

For years, Venezuela’s debt seemed like a dud investment. In 2017, Venezuela missed payments on bonds issued by the government and its state-owned oil company — leaving foreign investors, including U.S. financial institutions, holding tens of billions of dollars of its debt.

Now many of those investors are hoping that the United States’s removal of Maduro — and its intention to take over Venezuelan oil — will boost the country’s economy, and ultimately its ability to repay its creditors.

“There are much, much greater upsides in the bond market than what investors went to sleep thinking they were on Friday,” says VanEck’s Fine.

His fund manager bought Venezuelan government bonds “in the last few weeks,” betting that the Trump Administration’s increasingly aggressive rhetoric around Venezuela would eventually lead to some kind of action. Now Fine is hopeful that the interim presidency of former Venezuelan Vice President Delcy Rodriguez will eventually lead to elections and a future Venezuelan government that is “arguably more market-friendly.”

For a long time, “we really didn’t see much [that was] interesting in Venezuela. It is highly indebted, and there was no prospect of regime change,” Fine says.

But now, from a purely financial point of view, “I think it’s a great opportunity,” he adds.

U.S. weapons makers are on the up and up

The surprise U.S. seizure of a foreign leader on his home soil did increase geopolitical instability, which sometimes can rattle Wall Street. But this week, it benefitted some equity investors — especially in weapons manufacturers and other defense contractors.

Shares in Lockheed Martin, Boeing, RTX Corp., and General Dynamics are all up this week, with the latter hitting an all-time high.

Precious metals are soaring 

At the same time that stocks hit record highs, so did some of the precious metals that investors traditionally use as a hedge against uncertainty and risk. Gold prices rose early this week, while silver prices reached a new record high.

So did the price of copper — which may not be needed for pennies anymore, but which is in high demand for data centers, electric vehicles, and a host of other manufacturing purposes.

Copper is also sometimes seen as an indicator of the nation’s shift towards renewable energy — providing a greener contrast to Wall Street’s excitement this week over Venezuelan oil.