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Is It Finally Time to Buy Energy Stocks?

By Dr. Steve Sjuggerud
Tuesday, April 7, 2015

"Why You Can't Buy Oil Stocks – Yet." That was the DailyWealth headline on January 6.
 
I wrote that 90 days ago... Has the picture changed yet for oil stocks?
 
Is it finally time to buy energy companies yet?
 
Back in early January, EVERYONE was buying oil companies. Everyone, that is, except me. Here's why I wasn't buying back then:
 
I hate to disappoint you... but I am NOT buying oil companies – yet.
 
The reason is simple. Oil stocks are not hated enough – yet.
 
For the bottom to be here in oil stocks, investors have to give up on them. You want to be a buyer of oil stocks AFTER everyone has given up on them.
 
The problem is, the opposite is happening... Investors are getting extremely bullish on energy stocks.

So where are we today? Have investors given up? Is it time to buy yet?
 
In short, we are not there yet... but we are getting close.
 
Oil is no longer the big story in the financial media (finally!). And investors are finally giving up on oil companies – a bit.
 
Let me show you one (unique) way to make my point...
 
Let's look at the "Google Trends" search results of the term "energy exchange-traded fund (ETF)." (You can see how popular an investment theme is by looking at its Google Trends results.)
 
In December, Americans searched on Google for the term "energy ETF" more than any time, by far, since the financial crisis. Take a look:
 

You can also see that interest in energy ETFs has fallen off dramatically since December.
 
In short, I think that investors have stopped buying energy stocks... but they haven't fully given up on them yet...
 
Investors haven't sold yet. (One way to see this is to look at the "shares outstanding" of the main energy-stock ETF... The shares outstanding have stopped going up... but they're not going down – yet.)
 
I look forward to buying energy companies at some point...
 
There are plenty of positives here... Energy stocks are one of the cheaper sectors in the stock market today. Both oil and oil companies crashed in price, and they may have bottomed. I do like some of what I see.
 
I am just not a buyer – yet. We haven't seen investors give up enough yet.
 
When the time comes to buy, I will let you know...
 
Good investing,
 
Steve




Further Reading:

Last month, Steve showed how he uses Google Trends in his analysis. "We have just begun our work with Google Trends data," he writes. "But we like what we see so far." Get the full story here.
 
Yesterday, Steve told readers why they shouldn't be listening too closely to the Fed. "Don't listen to the Fed. The Fed has cried wolf for more than six years," he writes. "There is no wolf." Find out what Steve's doing instead right here.

Market Notes


SELLING THE BASICS: STILL WORKING

Today's chart is an important reminder that selling the basics isn't exciting... It just works.
 
Longtime readers know we're fans of simple businesses. Contrary to popular belief, you don't need to invest in complicated businesses to make money. Companies that "sell the basics" are often great long-term investments. Products like beer, chocolate bars, and cigarettes are some of our favorite examples.
 
You can add auto parts to the list...
 
Most folks make a trip to the local auto-parts store at least once a year. It's only a matter of time before something needs to be replaced... a headlight, a battery, or maybe some wipers. Auto parts are basic products that everyone needs. This is good for auto-parts stores like O'Reilly Automotive (ORLY), AutoZone (AZO), and Advance Auto Parts (AAP).
 
As you can see below, America's major auto-parts stores are generating big gains for investors. Shares of each are up more than 70% over the past two years alone. It's the latest proof of what we've been saying for years: Selling the basics isn't exciting... It just works.
 

premium teaser

Another reason to keep energy stocks on your radar...
 
It's tough finding value in the U.S. these days. After six years of gains, the U.S. stock market is getting expensive...
 

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