Welcome to Extreme Investor Network, where we provide you with valuable insights and unique information to help you navigate the world of investing. Today, we are going to discuss the current state of the stock market, with a focus on energy stocks and oil prices.
In the past year, the S&P 500 has seen a solid gain of over 9%. However, energy stocks have outperformed the broader market, with the Energy Select Sector SPDR Fund (XLE) up almost 17%. This surge in energy stocks correlates with the rise in oil prices, with West Texas Intermediate crude oil approaching mid-2022 highs and Brent crude poised to test late 2023 highs.
While it may be tempting to make bullish bets on oil using ETFs like the United States Oil Fund (USO), it’s essential to be cautious. ETFs like USO have a “roll-cost,” which can drag down performance over time as they adjust near-term oil futures contracts. Instead, consider making longer-term investments in companies within the energy sector for more sustainable returns.
One way to get exposure to the oil services industry is by investing in companies like Halliburton or Schlumberger. For integrated oil companies, Kinder Morgan is a reliable midstream pipeline company. In the oil refining sector, companies like Valero or Marathon Petroleum have shown strong performance. While investing in these companies during peak gasoline demand may seem risky, their low earnings multiples make them attractive opportunities.
If you want to take a less risky approach to gaining long exposure to companies like Marathon Petroleum, consider a diagonal call spread strategy. By purchasing longer-dated call options and selling higher-strike nearer-dated calls against them, you can offset decay and manage risk effectively.
At Extreme Investor Network, we provide you with the information and strategies you need to make informed investment decisions. Remember, investing carries risks, and it’s crucial to seek advice from your financial advisor before making any decisions. Stay tuned for more valuable insights and investment tips from Extreme Investor Network.
