Energy Sector Rotation: Buy Nuclear
Posted by Frugal on April 16th, 2008
I missed out quite big on the recent waves of the hot energy sectors, due to my belief in the global synchronized slowdown. Energy sectors however are still in play (so far).
There are many sub-sectors in the energy. First it was coal, with FDG, PBT. Then it was natural gas, with CHK, APA. Then it was the rebirth of solar energy, with FSLR, SPWR. Most of these names have risen by at least 20% to 100%. And partly, thanks to the high crude oil price, the energy wave seems to be continuing.
Yes, to my surprise, crude oil price has not corrected much if at all. However, the calls from pundits for a significant commodity top, continue to worry me.
If I would have to invest now in the energy sector, I would probably invest in nuclear sector, with CCJ and DNN in mind, both of which I have already owned.
However, if crude oil does correct by more than 10%, expect these volatile stocks to go down even more.
The spot/future commodity markets in general may be making a major top. However, if the thesis of peak oil is correct, pretty much all of the above sub-sectors should give you very good return.
I look forward to a short-term bottom in the energy market to come. But I have been waiting for too long, just like waiting for the general stock markets to tank from last May to last October. Well, it did tank, but the grueling four months wore out my patience completely, and at the end, I gave up my short/hedge positions. Such is the tricky nature of the market.
I would recommend buying nuclear energy stocks for the long term. And if they correct 10% or more from here, I would load them up.
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April 17th, 2008 at 7:01 am
I think the era of cheap oil is almost over. It already seems so long ago that oil was $35/barrel and gas was $1.35/ gallon. I would use any pullbacks to $85-$90 oil to load up in oil stocks. There is still plenty of oil to be had but the easy stuff has been sucked out already. It will only get more costly to keep up current production. Most of the largest oil fields are in major decline.
April 17th, 2008 at 12:06 pm
I have some good oil related stocks that I plan on holding forever. If you look at these charts, you see year over year gains. ex: DO, RIG, PBR, UPL, TEX. These seem like much better plays than companies like MSFT, which continues to make bucket loads of money but share appreciation is zero for the past 10 years. How can this be true? I do not get it.
April 17th, 2008 at 2:11 pm
Mike, it is share dilution. That and the fact that they are so big and already control such a high share of the mkt there isnt anywhere to go. They have always had a large balance of cash and nothing to buy, so it returns little.