Today, I’m “Deep in the Heart of Texas” (as the famous 1941 song goes). Specifically, I’m here in Dallas for the MoneyShow conference to share my latest views on the markets with hundreds of profit-seeking investors, writes Mike Larson.
Texas is energy country, of course, and these are pretty healthy times for the sector. U.S. crude oil is trading in the mid-$70s, while Brent crude (the world benchmark) is going for the low-to-mid-$80s. Companies are coining money as a result, with S&P energy sector profits surging 124% in the second quarter.
That’s completely different from the last time I visited Dallas in the summer of 2014. I was there to interview legendary oilman and billionaire T. Boone Pickens, and crude oil was just starting an epic plunge. It ultimately sank from more than $100 a barrel to $26-and-change in February 2016.
So, what’s boosting prices these days? Analysts credit strong economic growth on the one hand, and concerns about Iranian supply on the other. Iran is the third-largest producer in OPEC, and it will fall under U.S. sanctions as of November 4. Those restrictions could drain the world market of as many as 1.5 million barrels per day (BPD).
Saudi Arabia will likely help offset some of that supply deficit by increasing output. But many are skeptical the country has the will, or the spare capacity, to fully compensate. That means we could see triple-digit crude prices again before long.
All of this is great news for U.S. producers, who are churning out record amounts of oil. Led by fields in Texas and North Dakota, American output surged by 269,000 BPD to an all-time high of 10.964 million BPD in July. That puts our country just behind Russia in terms of global output, though the Saudis could likely top us if they chose to pump all out.
I definitely have my concerns about the broader market, as I’ve been sharing for a while now. But the energy sector outlook is pretty solid, and that means there may be some attractive profit opportunities in the oil patch.
Rather than just throw darts at the wall, though, you can use tools like our Weiss Ratings Stock Screener to find the most-promising sector plays. I created this Top-Rated Energy Stocks Screener to get you started.
It lists all the U.S. energy companies that have earned Buy or Hold grades from our Weiss Ratings system. I further narrowed the list to include only companies with at least 50,000 shares in average daily trading volume and at least $50 million in market capitalization.
When I sorted in descending order by Rating earlier this week, Evolution Petroleum Corp. (EPM) grabbed the top spot. It was followed by Dorchester Minerals LP (DMLP) and Renewable Energy Group (REGI). Those stocks were recently sporting year-to-date returns of 65%, 44%, and a whopping 142%.
I don’t know for sure if crude is going to hit $100 this month or even this year. But I do know that if it keeps heading in that direction, energy companies like these are going to keep piling up the profits. So, consider doing some of your own additional research on the names that make our Weiss Ratings cut – and putting the best ones in your portfolio.
Until next time,
Mike Larson
Check out Mike’s short video, Mike Larson’s Dividend Stock Picks at MoneyShow San Francisco here.
Duration: 3:48.
Recorded: August 24, 2018.
Check out Mike’s short video, 2 Safe Yield Stock Picks at MoneyShow San Francisco here.
Duration: 4:42.
Recorded: August 24, 2018.
Check out Mike’s short video interview, Conservative Stock Picks for 2018 at MoneyShow Las Vegas here.
Duration: 3:33
Recorded: May 14, 2018
Check out Mike’s short video interview What Investors Are Doing Wrong and How to Fix It at MoneyShow Las Vegas here:
Duration: 2:22
Recorded: May 14, 2018.
