Oil and energy stocks are getting creamed. Alternative energy shares are faring no better. It’s a wholesale rout!
As oil prices crash through $65 per barrel – levels not seen in years – gasoline prices are dropping fast. Most people are rejoicing and thanking their lucky stars that they’re saving so much money at the pump.
But for those of us in the energy patch, it’s not a pretty moment. And that’s precisely why, as an energy investor, you need to buck up and look for opportunity.
This is the time to stay focused and watch what the energy companies are up to.
By doing that, I have discovered the insiders’ secret that might actually make you happy about the price of oil.
Taking Stock
Unless you’re sitting on really crappy stocks, own shares on margin, or had the misfortune of investing in an oil and gas play at much higher levels through a “deal,” you have little to worry about besides paper losses, really.
Oil and gas aren’t renewable, obviously. And when prices fall, they get used up even faster. This crash in prices will stimulate both demand and non-oil dependent economies, which make up most of the world.
At a time when most global economies are barely on life support or just coming out of recessions, this news couldn’t be better. It’s like getting a super-stimulus without having to go into debt to do it.
That’s the long-term picture. The short-term picture, on the other hand, is pretty ugly, and will stay that way for quite a few months.
Thus you have a couple of choices: 1) Stay put and do nothing but stare at your portfolio, or 2) you can look at this as a major opportunity to wade into the market.
We’re choosing the latter. Here’s why…
Following the Insiders
Some savvy investors may be seeing the similarities between the crash in gold prices a couple of years ago and this current crash in oil prices.
But there’s a huge difference.
You see, gold isn’t a consumable asset like energy. It’s bought and stored or transferred into jewelry. It also serves as a supply of wealth. It’s not needed for an economy to function, like energy. Oil and gas get used and must be replenished… all the time.
Energy insiders see this difference.
Since the crash in oil prices, major and minor energy companies (a.k.a. insiders) are stepping up to the plate and buying back their own shares. Remember, insiders rarely buy unless they feel there is a strong profit motive.
This did not happen in the precious metals space.
In fact, I can only think of three instances in the past three years when an insider at a major mining company has stepped up to the plate. Yet, over the past month alone, a ton of insiders have bought into energy shares. That’s because they see this as a long-term opportunity to buy cheap in an industry that’s sure to improve.
Here’s a roster of some of the companies that have seen insider buying – most of which occurred in the past couple of weeks:
Chesapeake Energy (NYSE:CHK)
Continental Resources (NYSE:CLR)
Comstock Resources (NYSE:CRK)
Transocean (NYSE:RIG)
Energy XXI (NASDAQ:EXXI)
Vivint Solar (VSLR)
C&J Energy Services (NYSE:CJES)
Peabody Energy (NYSE:BTU)
Atlas Energy (NYSE:ATLS)
Jones Energy (NYSE:JONE)
Clayton Williams Energy (NYSE:CWEI)
Marathon Petroleum (NYSE:MPC)
Based on the current insider action, I believe these companies will reward shareholders in the future.
And these are just some of the significant buys in terms of size or notable companies. There are many, many more.
In this case, unlike the precious metals markets, the insiders are betting that the downturn in prices won’t be long-lived.
You may want to consider joining them if you have a longer-term perspective.
And “the chase” continues,
BY Karim Rahemtulla