Energy Rally Ideas
There is a growing realization that energy (oil and gas) could be a great fourth quarter 2021 investment thesis for several reasons:
Major and growing supply constraints due to "green" / "ESG" / "carbon footprint" public policy worldwide
Oil and gas stocks have been shunned by investors for some time in favor of renewable energy stocks
Economic growth in the wake of the pandemic, driving demand
No way that renewable energy can replace fossil fuels for a very long time
Short term bottlenecks driving prices up due to supply chain issues in the wake of the pandemic and hurricanes
Inflation
In short, a classic situation of supply shortages meeting growing demand plus inflation provide an excellent backdrop for investing in energy stocks. Â
Indeed, from negative oil prices last year for WTI (<-$25/barrel!), we have come a long way recently approaching $80/barrel and with $90-$100 per barrel in sight.
Some stocks on my watchlist for investing in this trend include the following ideas:
Chevron (CVX) - 5.21% dividend yield
Exxon Mobil (XOM) - 5.87% dividend yield
Energy Select SPDR ETF (XLE) - 4.1% dividend yield
Pioneer Natural Resources (PXD) - 1.33% dividend yield
Other ways to play the space include US Oil Fund (USO) for direct exposure to the commodity (no dividend yield, however, which is a nice bonus with the ETF's and operating companies).
Natural gas has recently gone parabolic as shown in the chart below. While it can continue to move higher, especially with colder weather on the way and supply shortages, a pullback seems more likely in the near term back to the trendline (just below $5) - this looks a lot like lumber's recent parabolic move upward, which was followed by a collapse. Personally, I would probably stay away from this one until it corrects.
I hope you find this post useful as you chart your personal financial course and Build a Financial Fortress in 2021. To see all my books on investing and leadership, click here. Â
Stay safe, healthy and positive. Â