Energy Stocks
Resource and commodity stocks in general should make up only a limited portion of your portfolio—say less than 20% for a conservative investor or as much as 30% for an aggressive investor. And as part of that segment, energy stocks could make up, say half of that total. The rest could be fertilizer stocks, mining stocks and so on.
Oil and gas stocks have been below-average performers lately, and many investors are tempted to get out of the industry altogether. However, the energy sector can play a crucial role in your portfolio as a hedge against inflation. The low inflation rates of the past couple of decades deserve some of the blame for the poor performance of the sector. However, energy stocks will likely rebound in years to come as the global economy recovers.
- Invest mainly in well-established companies;
- Spread your money out across most if not all of the five main economic sectors (Manufacturing & Industry; Resources & Commodities; Consumer; Finance; Utilities);
- Downplay or avoid stocks in the broker/media limelight.
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Pat McKeough responds to many requests from members of his Inner Circle for specific advice on specific stocks and other investments as well as questions on investment strategy and the economy. Every week, his comments and recommendations on the most intriguing questions of the past week go out to all Inner Circle members. And each week, we offer you one of the highlights from these Q&A sessions. While we reserve our buy-hold-sell advice for Inner Circle members, these excerpts provide a great deal of information and analysis on stocks we’ve covered for members of Pat’s Inner Circle....
PENGROWTH ENERGY CORP. (Toronto symbol PGF; www.pengrowth.com) produces oil and natural gas in Western Canada and off the Nova Scotia coast. Gas accounts for about 60% of its production; the other 40% is oil....
CRESCENT POINT ENERGY CORP. (Toronto symbol CPG; www.crescentpointenergy.com) produces oil and natural gas in western Canada. Its output is weighted 90% toward oil and 10% to gas....
BELLATRIX EXPLORATION (Toronto symbol BXE; www.bellatrixexploration.com) produces oil and natural gas in Alberta, B.C. and Saskatchewan. Gas makes up about 69% of its output; the remaining 31% is oil....
POTASH CORP. OF SASKATCHEWAN (Toronto symbol POT; www.potashcorp.com) is the world’s largest fertilizer producer. Its five potash mines in Saskatchewan and one in New Brunswick account for 20% of global potash capacity. Five of its mines have reserves of between 65 and 84 years. It also makes fertilizers from nitrogen and phosphate. Earnings for Potash were $3.51 a share (or $3.1 billion) in 2011. However, earnings fell to $2.42 a share (or $2.1 billion) in 2012....
U.S. oil production is up 40% since 2008. That’s largely because of new technologies like hydraulic fracturing, or fracking. This involves injecting water, sand and chemicals to break up shale and other tight rock formations and allow access to the oil and gas. The best way to profit from this volatile industry is through companies with high-quality reserves and diverse operations. Here is one of the diversified U.S. energy stocks we cover regularly....
Slowing industrial activity in North America and China has pushed down oil demand. At the same time, rising shale oil production from North Dakota’s Bakken region has increased inventories. Both of these factors have weighed on prices. However, low prices are a mixed blessing for integrated oil companies like Suncor Energy. They earn less profit by producing crude, but their refineries also pay less for the oil they use....
Encana took its present form on December 1, 2009, after the old EnCana Corp. split itself into two new companies: the new Encana, which focuses on natural gas, and Cenovus Energy, which specializes in oil sands. Lower gas prices have pushed Encana’s shares down by about 36% since the split. Oil prices have weakened lately, but Cenovus’s stock is still up about 12%. Here is our latest report on these two energy stocks....
PRECISION DRILLING CORP. (Toronto symbol PD; www.precisiondrilling.com) sells contract drilling services to oil and gas producers, mainly in North America. It ended 2012 with 321 active rigs....
DEVON ENERGY CORP. (New York symbol DVN; www.dvn.com) is one of the largest U.S.-based oil and natural gas explorers and producers. Its production mix is 61% gas and 39% oil....