Over the same time period (since the beginning of November), the Invesco S&P SmallCap Energy ETF (Nasdaq: PSCE), which tracks small cap energy companies, is up an incredible 131%! It has been quite a run for an entire sector of stocks. This is many years' worth of excellent returns in just a few months. If you read my article that called the energy sector a once-in-a-lifetime opportunity back in November, you're aware that it wasn't just me pounding the table on that trade. One of my favorite professional investors was shouting the same thing from the rooftops... Murray Stahl of Horizon Kinetics Asset Management. His bullish call was based on the belief that the world is setting itself up for a looming oil supply shortage and resulting price spike. So far, he has been correct on the price of oil. Since November, the price of West Texas Intermediate crude has increased 50%, rising from $40 to $60. The rise in oil prices that we have seen since November has been driven by the optimism tied to vaccines and economies across the globe improving. That is a bullish oil demand story - not a supply crunch. The supply side of the oil market equation has also been bullish, although not for the reasons that Stahl expected... There is currently no actual shortage of oil supply. The bullish supply story in the oil market is due to the fact that Saudi Arabia has been aggressively cutting production to drive up prices. So while Stahl was 100% correct in calling the energy sector a once-in-a-lifetime opportunity, the looming oil supply crunch scenario is still a while off. I think he could be proven right, and we could see a major oil spike in the future. As of today, though, Saudi Arabia, which has plenty of spare production capacity, controls the price of oil. If the government wants to bring the price back down, all it has to do is open the taps. The bottom line for us at Wealthy Retirement is that the energy sector turned out to be an incredible opportunity back in November. The idea just worked out a lot faster than anticipated. I hope you've enjoyed some big profits from it... Good investing, Jody |
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