Editor's note: You still have time to get in on this massive uptrend... The market is filled with negativity today as rising inflation, global supply-chain disruptions, and the Russia-Ukraine conflict continue to dominate headlines. But there's one sector that's still thriving amid today's volatility... Energy stocks have been skyrocketing so far this year. And many investors are avoiding jumping into the energy space right now, assuming the sector will cool down soon. But Marc Chaikin, founder of our corporate affiliate Chaikin Analytics, says energy stocks are poised to rocket higher... In today's Masters Series, adapted from the June 23 issue of the monthly Chaikin Power Gauge Investor newsletter, Marc details how energy stocks are thriving so far this year... explains why they still have plenty of room to run higher... and reveals how you can take advantage of this red-hot sector.
You Haven't Missed the Energy Boom By Marc Chaikin, founder, Chaikin Analytics The "rolling crash" is almost everywhere these days... We're nearly halfway through 2022. The S&P 500 Index is down roughly 27% from its early January peak. It recently fell a staggering 10% in five trading days. And of course, tech stocks have fared even worse... The tech-heavy Nasdaq Composite Index is down around 30% from its November 2021 all-time high. And the story is similar for the more narrowly focused Technology Select Sector SPDR Fund (XLK). It's down about 28% since late December. Put simply, the rolling crash is now an "everything crash." But there's a big asterisk next to everything... That's because one sector is soaring this year – energy. The Energy Select Sector SPDR Fund (XLE) was up as much as 66% in 2022 before a cooling-off period in recent weeks. Despite that incredible outperformance, many individual investors are likely still stuck on the sidelines. And I'll bet the inner voice that prevents folks from making good decisions is in overdrive. It's armed with all sorts of excuses to avoid buying energy stocks right now... "I've lost so much in tech that I just need to wait the downturn out." "I see that energy stocks are up. But it looks like we're near the top." "Russia's war in Ukraine will be over any day now. So there's no way I'm going to make a big bet on energy today." That type of thinking is dead wrong. By buying into the energy sector right now, we're buying into a trend that has been going strong so far this year. That's happening despite a tough overall environment for investors. And it's not just 2022... Prices in this sector have been rising for more than two years. XLE is up more than 200% from its March 2020 low. Naturally, many individual investors are scared that the energy rally is on its last legs. They don't believe it can go on long enough to profit. But the fundamentals tell a different story... The reality is that $100-per-barrel oil (or higher) could be a fact of life for years to come. After all, it has happened before. Do you remember oil prices after the housing bust? West Texas Intermediate crude oil traded between $80 and roughly $110 per barrel from 2010 into 2014. That's roughly four years of oil prices not too far from their current levels. And this is the important part... Those sustained high prices happened well into the shale-oil revolution. In fact, horizontal drilling – the kind used in "fracking" – started outpacing the more traditional vertical drilling by 2006. So maybe the idea of $200-per-barrel oil feels a little too "out there" for you. But that doesn't mean oil won't trade between $120 and $150 per barrel for the next few years. Put simply, price history and current momentum are both on our side. And there's more to this story...
| Recommended Link: | |  NEW: Severe Stock Warning for July 2022 Ninety days ago, Wall Street legend Marc Chaikin issued a dire warning for U.S. stocks that quickly came true. Today, his systems just detected the next massive shift headed straight for U.S. stocks. And just like before, you have a very narrow window of time to prepare. In fact, history shows it could arrive by the end of July. Click here for full details. | | |
You see, the Baker Hughes oil rig count currently hovers at about 584. As its name implies, this data measures the number of functioning oil rigs in the U.S. at any given time. The oil rig count is up a lot over the past few years. It bottomed at 176 in August 2020. So that means it's up roughly 230% from its bottom. That sounds like a heck of a lot. But when you look at history, the perspective changes... From late 2011 through 2015, the U.S. oil rig count fluctuated between 1,300 and 1,600. And in much of 2018 and 2019, it was higher than 800. In other words, U.S. rig counts are up significantly from their COVID-19 pandemic bottom. But they still aren't anywhere close to where they should be during an oil and gas boom. For more proof that the energy rally isn't over yet, we can check supply and demand... The U.S. Energy Information Administration predicts that the global oil surplus will decline from 3.05 million barrels per day this year to 2.92 million barrels per day in 2023. The experts expect this already-surging energy market to get even tighter! That matters a lot as we enter the second half of this year... Folks, if you feel like you've missed the energy boom... you haven't. The war in Ukraine rages on. Oil prices could stay elevated for years. And U.S. rig counts are still catching up. Despite that, the energy sector just blew off a little steam. Nothing goes up in a straight line forever. Pullbacks like the one this sector just experienced are normal in a healthy uptrend. That makes now the perfect time to search for companies that profit when oil producers drill. But before we do that, we need to discuss what's going on in the markets right now... We unveiled our Industry Monitor Portfolio roughly three months ago. And since then, the markets have gotten hammered... At the time, the rolling crash had already infiltrated many sectors – like tech stocks. And now, it's almost everywhere. Every sector is "neutral+" or worse in the Power Gauge today. The Federal Reserve is doing just about everything it can to strangle the U.S. economy. It's essentially taking a stand. It's saying a recession is bad, but soaring inflation is worse. So the Fed is raising interest rates in hopes of quelling inflation. History tells us the central bank's approach will work. But it's all but guaranteed to generate a nasty recession. We're seeing those fears play out in the Power Gauge's interpretation of the market... Now, energy is the top-performing sector today – even after a recent pullback. That's true even though the Power Gauge currently rates all 21 stocks in XLE as some form of "neutral." (We'll get to the importance of the three different stages of "neutral" in a bit.) And the thing is... we don't want to deviate from our top-down, "best of the best of the best" approach. The Power Gauge is simply providing us with its unvarnished take on the markets. That's what the system always does. And the reality is that it's rough out there right now. With that said, energy is still incredibly compelling. Look at its year-to-date performance compared with the S&P 500 Index... Even after a pullback, it's obvious... Energy is the only thing working in today's market. And as we mentioned, the economic fundamentals of the energy market itself are driving that performance... U.S. rig counts are still lower than they've been during previous oil-price surges. The government expects supply to get even tighter over the next year. And Russia's war in Ukraine continues to disrupt the market as well. So, as long as the Fed holds its death grip on the economy, energy will continue to be the best bet for investors. Good investing, Marc Chaikin
Editor's note: Ninety days ago, Marc issued a dire warning for U.S. stocks that's already coming true... Now, he believes we're about to witness a new historic shift that could create more devastating losses for some investors. If you want to see what's coming and learn how to prepare immediately, click here to get the details.
| Recommended Link: | |  'Interest-Rate Hikes Will NOT Save You!' It didn't work in the '70s and it won't work now. In fact, if history serves as a guide, then nearly two DECADES of runaway inflation could be on the horizon. The good news is there's a straightforward, one-step plan to protect yourself. Just do NOT delay... because when the next inflation report releases, you might be kicking yourself for not paying attention sooner. Click here for your inflation protection plan. | | |
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