Energy Strategist: Get Rich from the World’s Most Important Commodities
Watching my 11-month old son creep around the floor from one end of the room to the other and back again is exhausting – for me. By contrast, my son seems to have unlimited energy; he’s like the energizer bunny who keeps going, and going, and going. He only stops because I or my wife picks him up. If everyone acted like him, we could shut down all the electric utilities in this country and just rely on people power alone.
Energy is an Essential Service
I’m joking, of course, but my son’s boundless energy got me thinking about the importance of energy in our society. I have experienced more than one blackout at my house during thunderstorms. I’m sure you have also. It’s especially bad if the blackout happens at night. I find myself feeling completely helpless. I can’t see, I can’t use my computer or watch TV to find out any information, the air is quickly becoming an uncomfortable temperature, and the food in my refrigerator is beginning to rot. When a blackout hits, I usually lock up the house, get in my car, turn on the radio, and drive somewhere that still has lights on. But I couldn’t do this either if my car didn’t have any gasoline. Come to think of it, virtually everything I do in life revolves around electricity and gasoline. Without them . . . ugh, I don’t want to think about it.
Energy is what economists call an “essential service.” In fact, oil and natural gas are critical components of more things that we use every day than you can imagine. Below are just a few examples I haven’t mentioned yet:
- Home products: Tyvek wrap, PVC pipes, vinyl floors and carpet, paint ,furniture, and the roof
- Food: Natural gas is used to make ammonia, basic component of fertilizer used to grow crops
- Military and Law Enforcement: Kevlar body armor
- Health Care: aspirin and other medicines, heart valves, artificial limbs, and baby car seats
- Sports: Golf balls, footballs, tennis balls, fishing rods, and basketballs
- Cosmetics: Lipstick, lotions, nail polish, facial makeup, hair sprays, and gels
Energy is a Big Part of the U.S. Economy
Given the pervasiveness of oil and gas in our everyday living, it should come as no surprise that the oil and natural gas industry has an enormous impact on the U.S. economy. Specifically, it accounts for more than $1 trillion of value or 7.5% of U.S. GDP, not to mention 5.2% of all employment and 6.3% of all labor income.
The Best Advice on Energy Stocks? – Robert Rapier’s Energy Strategist
No doubt about it, energy is an essential service used by everybody and companies that sell essential services make the best investments. Consequently, I want to own energy stocks. But there are so many stocks to choose from! And which promise higher profits, fossil fuel companies or purveyors of high-tech alternative energy?
I don’t know the answer, but I know somebody who does: Investing Daily’s own Robert Rapier, editor of the Energy Strategist. A recognized expert on all things energy, Robert appears regularly in the financial and energy media, and is a popular speaker at investment conferences.
So what is Robert Rapier thinking about energy right now? It’s a complicated topic that only experts like Mr. Rapier can fully explain, but I have gleaned four basic conclusions from some of his writings:
- Alternative Energy Won’t Replace Fossil Fuels Anytime Soon
“The big four–oil, natural gas, coal and nuclear–account for more than 91 percent of total energy consumed today. The EIA projects that the same four fuel sources will still account for more than 89 percent of global energy use two decade from now.
These figures likely overstate the importance of the most widely hyped alternatives, solar and wind power. Hydroelectric power plants account for close to 60 percent of renewable energy generation. Of the remainder, wind is far and away the most viable (24%); solar accounts for about 1 percent, geothermal just 4 percent.”
- The Supply of Crude Oil is Running Out
“Most of the major international organizations that make projections of future oil supply and demand dramatically overestimate spare capacity growth in coming years. Total US production of oil has declined from 7.38 million barrels per day in 1990 to around 5.6 million barrels day in 2010.
Production declines from mature, non-OPEC fields have been a good deal faster than most observers had expected. Most of this new oil production from tough and expensive-to-produce fields will simply replace declining production from mature oilfields. Rising demand from developing countries coupled with flat-to-declining production outside OPEC will result in a retightening of the global oil market in 2010 and 2011. I expect oil prices to top USD100 per barrel this year and reaching record highs at some point in 2011.”
- Natural Gas Will Be the Most Important Fuel of the 21st Century
“Coal and oil will remain key energy commodities well into the 21st century, but I expect natural gas to increase its share of the global energy mix substantially. The long-term drivers of demand for natural gas are twofold: relative abundance and environmental friendliness.” Natural gas emits 50 to 60 percent less carbon dioxide (CO2) than coal to produce the same amount of electricity. And gas also emits far less of other pollutants, including sulfur dioxide, nitrous oxides and mercury. This makes it the fuel of choice for electricity generators looking to build new capacity amid uncertainty over future carbon and environmental regulation.”
- Coal May Be a 19th-Century Fuel, but It Has a Bright Future
“Even assuming a significant cost attached to carbon emissions, coal plants will remain a relatively low-cost source of power for decades to come. Further, coal plants represent a reliable source of baseload power.
The international coal market is positively booming. Coal accounts for 42 percent of global electricity generation and that share should grow over the next two decades. The developing world is the primary driver of this growth; China and India produce 80 and 70 percent of their power from coal, respectively. Coal-fired generation in the region is expected to soar more than 176 percent by 2030.”
The Best Energy Stocks
In his Energy Strategist investment service, Elliott provides three recommended portfolios:
- A growth-oriented “Wildcatters” portfolio;
- An income-oriented “Proven Reserves” portfolio; and
- An aggressive-growth-oriented “Gushers” portfolio.
Those portfolios are the “cream of the cream” of his best investment thinking. But that’s not all. He also offers “field bets” on riskier but potentially high-rewarding investments in alternative energy, biofuels, and uranium (the other gold metal). And he provides specific buy and sell advice on more than 100 additional energy stocks in his Energy Watch List. Chances are, if you own an energy stock, Elliott has analyzed it and has issued an investment opinion on it in Energy Strategist.
My Favorite Feature: Energy Stock of the Month
The number of stocks Elliott analyzes is quite large and it can be a bit daunting to know how to get started. That’s why the feature I like most in Energy Strategist is “The Energy Stock of the Month.” Each month, Elliott highlights one energy stock that is set to soar in the near future. When I plan on adding to my energy portfolio, this monthly feature is the first place I turn to for ideas. I am not authorized to disclose the name of June’s pick, but it is a deepwater driller that has been beaten down by the BP (NYSE: BP) oil spill news despite having absolutely no exposure to the spill.
Proprietary Indices on Energy Sectors
Another great feature is Elliott’s proprietary indices on energy sectors:
- Master Limited Partnerships (MLPs)
- North American Coal
- Deepwater Drilling
- Integrated Oils
- International Coal
- Natural Gas
Elliott is a strong believer in trends and these indices provide an instantaneous snapshot of which energy sectors are performing well and likely to continue to outperform. As Elliott himself has said:
By examining these indexes periodically, we can get a good idea of which subsectors are performing well and identify profitable trends underway or potential signs of trouble ahead. In many cases, these insights would not be available to the investors who look solely at the S&P 500 Energy Index or the Philadelphia Oil Services Index.
I am not allowed to tell you which sector has the greatest positive momentum right now, but I have been authorized to tell you the worst-performing sector right now: deepwater drilling. We can thank BP for that!
Combine all these features I’ve mentioned with timely email alerts for breaking news stories and periodic subscriber-only live chats with Elliott himself, and I believe the Energy Strategist is the best value anywhere for profitable advice on energy investing. Subscribers who bought Elliott’s recommended stocks returned a sizzling 116.8% on growth and aggressive-growth energy investments between June 2006 and June 2008. And, overall, the Energy Strategist has returned 70.5% since 2005 (compared to a 10.5% loss for the S&P 500).