It's hard to imagine a world where energy demand will not grow over the long term. I'm bullish on pretty much all energy sectors - oil, gas, renewables, nuclear, etc. - as they will all play a role in satisfying the planet's unquenchable thirst for energy. But I'm particularly enamored with oil stocks right now. After years of oil producers having a "grow at any cost" mentality, investors are now holding them accountable to be wiser about their spending. Their shareholders are demanding that they prioritize dividends and stock buybacks over wasteful projects that don't produce cash flow. The mammoth oil companies are safe bets to do well in the future, and they usually pay decent dividends. But the smaller, independent oil producers are especially attractive. As long as they're cash flow positive, they're prime candidates to be acquired by bigger companies, which still need to grow but usually don't want to start digging new holes. A company like Occidental Petroleum (NYSE: OXY), which has a $51 billion market cap, is small enough to be swallowed up by the "majors" with market caps in the hundreds of billions. "Oxy Pete," as it's affectionately known, is a favorite of Warren Buffett's. The legendary investor bought more shares in December and now owns 28% of the company. As oil prices rise, stocks like Occidental Petroleum should do extremely well. If you don't have enough exposure to the energy sector, consider adding some energy plays to your portfolio today. Good investing, Marc P.S. Occidental has almost everything I look for in a strong energy stock... But I recently found a company I like even more. My favorite oil stock right now is about one-seventh the size of Occidental and is one of the top producers in the Williston Basin, which includes the all-important Bakken Shale. This under-the-radar company is in such a strong position that it could turn a relatively small stake into a windfall in the next 12 months... and beyond. We've actually discussed this "oil shock savior" in Wealthy Retirement before... For more information on why I'm so excited about this company, click here. |
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