It happened three times in one day.
The first time I was parked at a never-ending red light. Glancing off to my right, I noticed a Hummer H2 lumbering into a corner gas station. I wanted to ask the driver why he was even driving a monstrous gas guzzler, but was quickly interrupted by several blaring horns behind me once the light changed.
The second time happened only an hour later. I shrugged off both sightings, dismissing them to chance.
Later on, I was filling up at a nearby station when a third Hummer pulled up to the pump behind me.
This time I couldn't resist.
I've never been able to nail down the miles per gallon one of those behemoths get. From what I've read, the number ranged from 7 to 16 mpg. Neither sound too comforting. While capping my own gas tank, I politely asked the gentlemen whether driving around in the H2 was hurting his pockets.
"Are you kidding? Cheap gas is back for good, so why not?" He replied.
I didn't have the heart to tell the driver he was in for a rude awakening.
Energy Stocks Still Strong in the Long Term
He did have a small point, however. Gas is certainly cheaper. And I couldn't think of a better time to fill up a hulking gas guzzler like the H2 than now.
Last week, the Energy Information Administration reported the average retail price for regular gasoline was $2.91 per gallon. That's a 24% drop in a little over a month.
In the short term, it appears that oil doesn't have much to hold on to. With the markets worried about lower fuel consumption due to a global recession, our eyes were focused on how OPEC would defend lower oil prices. The cartel's lackluster solution was to trim production by 1.5 million barrels per day. It took them an hour and a half to decide it.
The production cut was the result of a compromise. OPEC price hawks like Venezuela and Iran were calling for a cut of more than two million barrels per day. Other members were calling for a smaller cut of 750,000 barrels per day. The move failed to rally oil prices and the OPEC price basket fell to its lowest in 19 months.
I wouldn't run out to your local SUV dealer just yet.
Think about it for a second...
The hard truth for people to understand is that the world has been struggling to produce oil. Quite frankly, I don't see things improving. Sure, demand will go down during a recession. Unfortunately, that won't solve the problem.
Like my H2 friend, many people have no idea what we're in for. They see cheap gasoliine and think things are back to normal.
If there's one thing I've been trying to reiterate during this volatile market, it's there are still dozens of opportunities out there for investors. The fact that energy prices have steeply fallen since July, I can't think of a better time to invest in energy.
Granted, it's not easy to find those gems.
As one of my readers asked recently, "How do I know I'm putting my money in the right stock?" Her major concern, however, was where to start.
3 Things to Know Before Investing in Energy Stocks
So what do I look for first?
I'll admit that searching for the right stock can be a daunting task, especially with the market turmoil around us.
Once I pinpoint a certain stock, there are three simple things I need to know before I even consider spending a single dollar. If the company meets the criteria, I'll continue my research and ultimately decide whether they're worth their salt.
Property: Does your prospective company have a strong list of assets? In a market like this, I prefer to stick with companies that are actively drilling on their property and have a steady production they can bring to market.
Debt: Having debt isn't a bad thing. Having too much debt, however, is a problem. Too much debt could drain a company of its cash and is a good indicator to stay away.
Long Term Bull: There is one question I ask myself before I think of buying a single share of any stock. It also happens to be the exact same question I posed to my readers last week: Can you see yourself owning this company ten years from now? It's that simple. I haven't met a single person who believes oil prices won't rise over the next ten years. Even though I may not hold a particular stock for that long, it gives me an idea of how confident I am in them
So, there you have it.
The bottom line is that you can either sit on the sidelines in fear, or grab those deals with both hands. I can tell you without a doubt in my mind that the latter group will be the ones smiling when all is said and done.
Until next time,
Keith Kohl
P.S. Even though there's a host of opportunities for investors right now, it's up to you to take advantage of this bear market. The $20 Trillion Report is poised to strike while the iron is white hot. It wouldn't be fair if I didn't offer you the same chance to profit along with your fellow readers. If you're interested, you can learn more about it here.
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