Tap the Brakes on Energy Stocks
The stock market has bounced around quite a bit this week, up on Monday, and then down on Tuesday, Wednesday and again today. The reality is the market continues to oscillate, which is why stocks will be up one day and then down the next. This is the oscillating market I have referred to several times in Growth Investor.
As I discussed earlier in March, we’re in the midst of a “mean reversion rally.” This is where the stocks that previously lagged suddenly become market leaders.
In this case, some of those market leaders have been in the energy sector. In fact, the Energy Select Sector SPDR Fund (NYSEARCA:XLE), which tracks energy stocks, is up about 30%, year-to-date. The Invesco QQQ Trust (NASDAQ:QQQ), which tracks tech stocks, is down about 0.8%, YTD.
XLE’s climb higher this year is certainly impressive, but the truth of the matter is it is not filled with fundamentally superior stocks, which is why I don’t expect its rally to last. XLE’s top five holdings are Exxon Mobil Corp. (NYSE:XOM), Chevron Corp. (NYSE:CVX), ConocoPhillips (NYSE:COP), Schlumberger Ltd. (NYSE:SLB) and EOG resources, Inc. (NYSE:EOG), which are up between about 23% and 43%, YTD.
Again, this is an impressive performance in what’s been a particularly volatile market these past few weeks. However, when you plug those stocks into Portfolio Grader, their fundamentals actually aren’t much to sneeze at.
As you can see above, they all earn a C-rating for their Total Grade, making each stock a “Hold.” In addition, their Fundamental Grade is either C- or D-rated. This tells me that these stocks’ fundamentals are anything but superior.
The truth of the matter is crude oil prices have surged in the wake of the Biden administration’s cancelation of the Keystone Pipeline as well as a drilling ban on federal land. Crude oil prices are also benefitting from a worldwide economic recovery led by China, emerging markets and the U.S.
IEA Executive Director, Fatih Birol, stated, “We do not think gasoline consumption will come back to 2019 levels again.” The IEA noted that daily gasoline demand dropped by a record 2.9 million barrels in 2020, down more than 10% from 26.6 million barrels a day back in 2019.Interestingly, the International Energy Agency (IEA), based in Paris, is now forecasting that demand for diesel and gasoline is peaking due to growing market share for electric vehicles (EVs). The IEA does not expect that the demand for diesel and gasoline will return to pre-pandemic levels. The IEA also forecasted that 60 million EVs will be on the road in 2026, up from 7.2 million in 2019.
So, before you invest in energy stocks, I urge you to tap the brakes. Yes, many have posted spectacular performances this year, but crude oil prices may not stay high forever, especially since worldwide crude oil demand tends to ebb in the fall after surging in the spring due to the simple fact that there are more people in the Northern Hemisphere than the Southern Hemisphere. In other words, a seasonal demand anomaly for crude oil should never be confused with strength.
Stick with Fundamentally Superior Stocks
Instead, I encourage you to fill your portfolios with fundamentally superior stocks, which describes my Growth Investor Buy Lists stocks to a “T.” My average Growth Investor stock has had its earnings revised 16.7% higher in the past three months. Typically, positive analyst revisions precede future earnings surprises. In addition, my average stock is characterized by 66.1% annual sales growth and 276.4% earnings growth, so I am expecting a spectacular first-quarter earnings announcement season for my Growth Investor stocks, with my companies set to post wave-after-wave of positive earnings results.
This earnings season is important because it will represent peak sales and earnings for my Growth Investor stocks and the overall stock market due to easy year-over-year comparisons. Simply put, I look for many stocks to post earnings surprises, which, in turn, will drop kick and drive my Growth Investor stocks higher.
As always, my Growth Investor Buy Lists are “locked and loaded” for the coming earnings season. If you want your portfolio to be, too, now is an especially great time to join Growth Investor. You see, tomorrow I will be releasing four new stocks in my Growth Investor April Monthly Issue – two High Growth stocks and two Elite Dividend Payers. Every stock earns an A-rating in Portfolio Grader , and my Elite Dividend Payers also hold an A-rating in Dividend Grader, making them rare AA-rated stocks. (For full details, click here now.)
So not only will you be well-positioned to benefit from what should be a phenomenal first-quarter earnings season, but it will also help get you on the right side of a great divide that’s opening up in America. On one side is a new aristocracy that’s amassing more wealth, more quickly than any other group in American history. For people like me, the one percent, life has never been better, more prosperous.
On the other side, the opposite is happening. Wealth is flowing out of the pockets of ordinary Americans at an unprecedented rate.
What’s happening is only going to gather in strength over the coming decades. It certainly won’t weaken.
Few Americans even know that any of this is going on. I’ve never seen anyone from my side of the chasm step forward to explain any of these things.
It’s why I put together this video. In it, I’ll lay out exactly what is happening, including several key steps every American should take right now. It doesn’t matter if you have $500 in savings or $5 million. You can benefit from the information in this video.
It’s free to watch and by doing so I know you’ll be ahead of everyone else struggling to understand what is really going on.
Sincerely,
Louis Navellier
On the date of publication, Louis Navellier did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
Louis Navellier, who has been called “one of the most important money managers of our time,” has broken the silence in this shocking “tell all” video… exposing one of the most shocking events in our country’s history… and the one move every American needs to make today.
