Determining the best time to buy energy stocks
The best time to buy energy stocks is right now! While individual energy stocks may go up, down, or sideways, the need for energy is going nowhere but up while the available energy supply is going down. This is a supply/demand formula that can’t lose.
The only question is which stocks to buy or how to make the best energy play. The most conservative way to go would be to buy an energy exchange traded fund (ETF) or mutual fund. The ETF can be traded just like a stock with no minimum investment. Many are available.
In terms of available energy stocks, there are many possible plays. The most obvious one is oil and gas. Both of these have increasing demand and decreasing supply. It is probable that we are already past peak oil. This means that we will be producing less and less oil as the growing economies of China, India, and other countries are requiring more and more. Simple population growth also indicates higher demand.
Other energy plays include alternative energies such as wind, hydroelectric, geothermal, biofuels, solar, nuclear, and others. The smart investor needs to investigate these various sectors and make a determination as to which are most likely to create the most value in the short and long-term.
It is best, of course to diversify and buy a number of different types of energy. Again, an ETF or mutual fund can give you instant diversity. There are other ways to invest in energy that many people don’t think about. That would be the support companies for various energy resources.
As oil companies investigate new oil resources, they will look into sources that are more difficult to reach or to extract. This means things like more off-shore drilling and also oil extraction from oil-sands. These oil extraction techniques require certain equipment and technology. Investing in this equipment and technology can be a secondary way to profit from the industry.
Recall that those people who sold food and supplies to the gold miners in California usually made more money than the miners.
Whether biofuels take off or not, they have already caused the price of certain foods to go up. Investing in corn, sugar cane, and other biofuel food commodities can be very profitable if you get in soon enough. Again, just buying a commodity ETF or mutual fund can be very profitable.
The energy sector and commodities in general are in a bull market and it isn’t going to stop any time soon. With the supply/demand factor working in favor of a bull market in commodities, it is a smart way to go.
Some will argue that high gas prices will decrease the use of oil, but petroleum products are used in many industries and are present in a myriad of products. Also, the emerging economies of China, India, Russian, and others are going to see more prosperity and they will be using much more oil going forward.
Buying energy stocks, ETFs, and mutual funds is a no-brainer. The time is now.