Cutting Through the Energy Fog
Two Energy Truisms
Every gambler knows the secret to surviving is knowing what to throw away and knowing what to keep.
If you can apply that sage advice to this market, then you're well ahead of the game.
Today, I want to let you in on how I've been doing just that — and how you can do it, too.
Do I think cleantech has a very bright and profitable future? Yes I do.
Will I also invest in the dirtiest tar sand project there is? You betcha.
Investing with morals is great if it turns you a profit. I applaud you if you can do it. Lately, it hasn't been so easy...
But when things turn sour for alternative energy, I'm not one to pout. I don't need to blame politicians, rant about subsidies, or try to convince the world cleantech is the future.
I'm not a prophet; I love profit.
And I won't sugarcoat it: Cleantech stocks have been the dogs of the market lately.
Oh well, I know plenty of ways to make an energy dollar... And I'll share some of those in a second.
First, a snippet from a weekly energy update I get from Bloomberg New Energy Finance, commenting on the performance of the WilderHill Global Innovation Index (NEX), which tracks 98 cleantech companies worldwide:
What marks the NEX out as different is that its close on Monday was its lowest level since the beginning of September 2010. In the same period, by contrast, the S&P had advanced 23%.
The under-performance of clean energy shares in the last year — in fact in the last 18 months — has come despite record levels of investment in wind and solar. It reflects pessimism about the effect of cash-strapped government budgets on subsidies for clean energy around the world, and pessimism about the ability of renewable energy manufacturers to protect their profit margins.
What could bring to an end, and reverse, the NEX's under-performance, now amounting to some 35% relative to the S&P 500 since the beginning of 2010?
The key to the future direction in clean energy share prices may well be government policy. At the beginning of this week, there was at least the glimmer of an intriguing twist in Chinese policies to encourage investment in solar energy.
I don't know about you, but I'm not really comfortable investing in a sector that's current “key to the future... may well be government policy.” Have you seen how those guys are acting lately?
I'm folding... for now.
Get In Tune
I'll share some other inside info with you — stuff I told my premium readers a few months ago:
The market as a whole isn't properly valuing cleantech stocks.
We've tried to fight it for quite some time. But we can't change it.
In fact, some of our best gains this year have come from outside the cleantech space, from companies like Panasonic (NYSE: PC) and Nissan (PK: NSANY), and even from agriculture and Dow short ETFs (NYSE: DXD).
Most recently, we've seen our beryllium play, Ixxxxxxxxxxxxxxx, tack on 70% in a few weeks.
With ongoing turmoil in the Middle East, the dollar at a 29-year low, inflation starting to rear its head, and excess public debt in Europe and here at home... the market isn't interested in what it considers 'what ifs'.
And no matter how wrong it is, it still considers cleantech a 'what if'.
So we'll continue to buy the best cleantech stocks out there and wait for the Street to realize what it's missing... But we're also going to stay nimble, and stray outside our comfort zone to take some easy gains when they're available.
Things like index funds, resource plays, and commodities will all be on the table.
The macro situation is setting up to offer good gains from precious metals and agriculture this summer. And we're not going to sit out easy gains.
That was on May 24. We've closed nine winners since then, including a zinc company (Horsehead Holdings), an agriculture ETF (NYSE: DAG), and a silver ETF (NYSE: SLV).
But the one I've had the most success with is the ProShares Ultra Crude Oil ETF (NYSE: UCO).
Take a look at the chart. I bought the black dots and sold the green:
That's 27%, 12%, 10% — all from the same play. And we're back in right now for another go-round.
You see, I know I'm right about two things:
1. The end of cheap oil
2. The coming rise of cleantech
I don't know exactly when each will happen. And I don't care.
I don't care about arguing for or against either side. Watching those who do amuses me. I'll profit from each.
That's where your path and mine currently diverge... But they don't have to.
You see, I have the tools, knowledge, and ability to profit on a whim. I can buy oil at lunchtime and sell it by dinner. You probably don't have that luxury.
I can tell you to buy the Ultra Crude Oil ETF (NYSE: UCO) and the NASDAQ Clean Edge Fund (NASDAQ: QCLN), sit tight for ten years, and you'll make a hefty percentage. And that may be enough for some of you...
But there are plenty of others who aren't content stopping there. And I — or anyone else, for that matter — can't help you with one blanket statement. You've got to receive our premium advice daily for that.
Call it like you see it,
Editor, Energy and Capital
P.S. Just because I can't doesn't mean I won't try. To play the oil ETF like a fiddle, buy every time it dips to the low $40s or under. Sell in the high $40s to low $50s. Rinse and repeat.
Energy Demand will Increase 58% Over the Next 25 Years
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