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Clear Thoughts
Making Money on Energy
| What is the best way to make money from energy stocks? |
The national anxiety over the price of gas is a frequent topic not only in the press, but also at dinner tables, cocktail parties and around office water coolers these days. Perhaps the only benefit of this mass catharsis is that it temporarily masks the coming sticker and home budget shock of the price of heating oil to come this winter for home owners, landlords, schools, places of worship, businesses, stores and the government itself.
We have been receiving a large range of questions coming in by email and over the phones this week from investors including: are oil prices artificially high, who and what caused the price to almost double, is it really just from the hurricanes, and the biggest question of all, is this a permanent situation or is this short-term?
As citizens, we believe some good additional questions are: as a country, what are we going to do about this long term, and how can we make ends meet today?
As a money manager, what we want to address is can our investors profit from this situation and can we help make that happen? To accomplish this we seek to identify where is the highest probability to make the most profit by strategically investing in public companies?
Traditional research starts with the following questions. Is there more money in oil, refining it into gas or heating oil, or is the real profit in natural gas? What companies explore for new reserves? Are the oil and gas reserves worth more in the ground prices go up or are is there more profit from those who can pump the most oil out the fastest? Which companies repair the wells when they break from storms? Who ships or creates pipelines and which is more efficient? How about coal, uranium and other alternative energy sources such as solar, hydro-electric and wind? Where are the energy innovators? Are there too many companies in each of these spaces and who will be the biggest winners? Which companies will be overstretched by demand and which can capitalize and make piles of money?
Most of our portfolios invest in energy related stocks as many of them have passed our rigorous criteria. We write research on these stocks. For example, just last week we published a research note (we call them Stock Intelligence reports) on Superior Energy Services (SPN) which was republished on the research page of Barrons. SPN provides oilfield services and equipment focusing on serving the production-related needs of oil and gas companies in the Gulf of Mexico.
Our solution to investing in hot sectors such as energy is quite simple. As money managers, we do not make investments based upon short term trends. We are focused on the fundamentals of every company within our selected styles and remain disciplined to invest only on this data. We have seen the price of oil and energy issues on a ride in both directions the past few weeks. Yes, this year many have outperformed the indexes, but remember many did not last year.
This year we will probably purchase more companies within the energy sector and each of the sub sectors discussed above. Are these great investments with the rising and falling price of natural gas and crude oil or will they ultimately turn out to be dogs?
Clear Asset Management looks at every public company every market day, we divide them into categories as we screen them searching for the best under valued and growing companies that are trading at a reasonable price and tossing aside all firms that do not pass our over 700 initial screens. We then rank the companies that pass our screens and own only the highest ranked ones for our investors. We trade as we uncover better opportunities and add higher ranked stocks than the ones we owned yesterday. Check our archive and see how each portfolio has eased in and out of energy. You can see the timing, ranking and weighting of our investments.
In conclusion, relax, and let our computers calculate which firms have the highest probability of success; energy related or not. Do not forget, in the end, our investment methodology is aimed at only one goal, to provide benchmark beating returns.
Read more on this topic in USA Today where our CEO is quoted.
http://www.usatoday.com/money/perfi/stocks/2005-09-22-hurricane-proofing_x.htm |
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