Energy Stock Investing: What 2011 Holds…
2011 is shaping up to be quite a year for investors.
Some interesting market trends are developing which could turn into big opportunities. In fact, there are a few trends that could make energy investors huge returns.
Before I jump into these upcoming trends, let’s take a look at the current state of the markets.
As 2010 comes to a close, markets are getting a nice year-end boost…
Even though there are still issues with European debt, the markets are holding onto excellent gains. If you managed to enter long positions back at the lows of late August, you’re sitting on some sweet profits.
Currently, the S&P 500 is testing new 2010 highs and is up 10% on the year. But it’s up 17% from the lows in late August. Oil prices out staged the broad market by rising over 23% during the same time period.
How did we get all the way up here?
It wasn’t long ago some investors thought the world economy was about to take another huge dive. Investor sentiment over the summer was wildly negative. The “flash crash” and European debt problems had investors shaking in their boots.
The uncertainty showed in the price action of the markets…
The broad markets were stuck in a volatile range from May through September. At the same time, oil was trading in the $70-$80 zone as investors deciphered global economic news.
The wild news had many investors ducking for cover. A strong surge followed by precipitous drops was the name of the game for months. Many investors sat on the sidelines.
But the smart money had different ideas…
They brushed the uncertainty aside and started off the current rally that put us at new 2010 highs.
Could the rally continue into 2011?
Some investors aren’t sure the markets will be able to hold onto the hefty gains of the last three months. You don’t have to search too far to find a bearish outlook…
While bears may see some market downdrafts in early 2011, the bulls should retain control.
After all, the prevailing trend is still strongly higher.
Equities look to continue their up-trends in early 2011. The S&P 500 will likely retake the 1,300 level with ease in coming months… a 6% move to the upside from current levels.
Even more importantly, oil looks to crack the $100 a barrel mark in 2011. Whether or not prices go on another rampage like they did in the summer of 2008 remains to be seen.
Ok, enough with the general market overview.
Here are some specific trends standing out for the coming year…
Rising Chinese and emerging economy petroleum demand is putting upward pressure on global oil prices. As these countries continue their hefty growth rates, petroleum usage is surging.
The demand trend will continue as long as these countries continue to grow (which they will).
Low risk entries in oil explorers, drilling, and services companies will pay off. Take a close look at U.S. onshore independent exploration companies. Many of them are still very cheap and have great upside potential.
Also take a look at the solar industry…
Solar companies are seeing solid growth in the last two quarters. Yet, many solar stocks are trading much lower than a month ago. A bearish short-term outlook hit the sector hard and pushed investors to the sidelines.
Many solar stocks are trading at very reasonable prices with great upside potential. As oil prices rise, these solar companies will no doubt see investor interest grow.
And finally, don’t forget about natural gas…
Natural gas has been in the dumpster for quite a while now. But in recent weeks, prices are pushing higher.
A number of low cost natural gas producers are still trading at reasonable levels. Now is a great time to take a serious look at some of those companies.
Especially if a new U.S. energy policy is just around the corner…
Many are thinking a version of the Nat Gas Act will pass sometime in 2011. A passing of such a bill will no doubt light a fire under natural gas producers.
No matter how you look at it, 2011 is shaping up to be a very interesting year for energy.
Hang on to your hats…
Category: Stocks
