I’ve made no secret about my affection for domestic energy stocks in this market. They have been absolutely hitting the ball out of the park the past couple of years thanks to the boom in U.S. crude oil, natural gas and natural gas liquids (NGLs) production, distribution, storage, refining and export.
And my Safe Money Report subscribers have been right there in the thick of things, making nice profits along the way. Heck, we’re sitting on open profits of as much as 22.2 percent and 45.4 percent on some of my direct energy plays — in less than a year.
But I want to challenge your thinking on energy stocks. I want to ensure you aren’t making the same huge mistake many on Wall Street are. That mistake?
Assuming all the companies making money off the domestic energy boom are traditional energy firms.
Truth be told, some of my biggest existing and potential winners don’t even drill for oil or gas!
|There will be a whole new set of winners for the energy sector in the new era that is approaching us.|
Their workers aren’t toiling away in the prairies of North Dakota or ensconced on some deep-water well in the Gulf of Mexico. Instead, they’re working in factories thousands of miles away building products that are sold to the energy industry.
Or alternatively, they’re buying all those new, cheap and reliable supplies of oil, natural gas and NGLs — and churning out products at much better margins than their foreign competitors. That, in turn, is helping them dominate their industries.
One company makes and leases railcars that carry crude oil and other products from near the wellhead to market. As you might expect, its business is growing by leaps and bounds because so much oil is being found in so many new places underserved by existing pipelines. The stock has more than doubled since I first recommended it.
Another company should benefit from the dramatic cost advantage it can generate from cheap, domestically sourced energy. It’s in the steel industry, where energy costs account for up to 40 percent of the price of a finished product’s price.
It’s not just domestic steelmakers that should benefit from the domestic energy renaissance, either. Chemicals makers are also prime beneficiaries of cheap natural gas and natural gas liquids — and they’re lining up to take advantage of its availability. As a matter of fact, the American Chemistry Council recently said it’s tracking 148 new and planned chemical and plastics-making projects in the U.S., with a total investment value of $100 billion.
So when I say this is a great time to invest in energy stocks, I don’t mean the same old tired names you might think of, like Exxon Mobil (XOM, Weiss Ratings: B) or Chevron (CVX, Weiss Ratings: B+). I mean all kinds of other stocks that might not meet the old-school definition of an “energy stock.”
My recommendation? If you haven’t already given it a shot, check out Safe Money to get details on some of the big winners I’ve been picking.
If you’re not ready to take that step, at least give sectors like steel and chemicals a look. Or consider investing in ETFs that own a healthy dollop of those stocks, like the Materials Select Sector SPDR Fund (XLB). It has roughly 74 percent of its assets in chemicals companies, followed by 13.5 percent in metals and mining — a key reason why its shares just hit an all-time high this week.
Have you been buying stocks like these? Or ETFs? Have I done a good job of helping you understand what’s behind the powerful renaissance in domestic energy? Or do you still have additional questions you want answered before positioning yourself to grab YOUR share of these fantastic profits? Let me know at the Money and Markets website here.
Until next time,
P.S. This week Martin hosted two urgent video briefings! If you missed out on these please click here now to watch!