This Sector Is Surging Right Now!
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Last year, the Energy Select Sector SPDR Fund (XLE) rocketed 59.39% higher.
In 2023, XLE is above 6% as of this writing and being outperformed by the S&P 500’s 12% return.
But all that may be about to change, and it can mean a big opportunity.
The gas and oil industry has been plagued by underinvestment for years, but the war between Russia and Ukraine highlighted the importance of energy independence. Just last year, capital investment in the oil and gas upstream (drilling and extraction) sector rose 39% in 2022 to $499 billion, making it the largest year-on-year increase in history.
To make sure supply meets demand, those investments are expected to climb $640 billion in 2030 — 28.25% higher than in 2022.
And that’s a $640 billion reason to invest in energy stocks — increasing demand creates a profit opportunity.
Now, not every energy stock is going to be home run, and you can’t just throw darts at the board and hope you hit a winner.
Fortunately, with TradeSmith in your corner, our data and investing tools can point you to the best opportunities.
Let me show you.
Energy WinnersAlthough ETFs, such as XLE, provide diversification that risk-averse investors like, you can make more money by owning individual stocks.
Using TradeSmith tools, you can analyze individual stocks within XLE’s holdings, knowing in an instant if any are considered buying opportunities as measured through our Health Indicator.
You can think of our Health Indicator as a simple green-, yellow-, and red-light traffic system. Green means a stock is considered a “go” and is in a healthy and investable state, yellow means to “proceed” with caution, and red means to “stop” and stay away.
In XLE, 81.25% of the stocks are in the Green Zone as of this writing.
I narrowed the list down to the five with the lowest Volatility Quotient (VQ) levels in our system, which is a gauge of the risk levels associated with any single investment.
The lower the VQ percentage, the lower the potential risk.
VQ Level Breakdown:
- Up to 15% = Low Risk
- 15%-30% = Medium Risk
- 30%-50% = High Risk
- 50% and above = Sky-High Risk
And here’s a quick rundown about each company:
- Kinder Morgan Inc. (KMI) is an energy infrastructure company that owns and operates natural gas pipelines, underground storage systems, processing and treating facilities, and owns interests in or operates oil fields and gasoline processing plants.
- The Williams Companies Inc. (WMB) also operates as an energy infrastructure company, with 33,000 miles of pipelines and 29 processing facilities.
- Chevron Corp. (CVX) has nearly 7,000 Chevron gas stations around the country and has a hand in pretty much everything needed to get oil out of the ground and into your car.
- ONEOK Inc. (OKE) is focused on natural gas, gathering, processing, storing, and transporting it.
- Exxon Mobil Corp. (XOM) surpasses Chevron in gas stations, with 11,892 around the United States. It operates Upstream, Energy Products, Chemical Products, and Specialty Products divisions.
While this is just a quick snapshot of each company, Trade360 members can take a deeper dive into the holdings of XLE here to find more energy stocks worth looking into. Members also have access to several portfolio tools:
Position Size Calculator, which calculates the ideal position size for each stock you buy, based on the personal data you enter and your financial goals.
Pure Quant… our most powerful, proprietary quantitative algorithms that help you create a fully optimized, risk-balanced portfolio.
Market Health Alert Tool… which analyzes the market as a whole and tells you which indexes are in buy or sell mode.
And much more.
It all starts in your TradeSmith Finance Dashboard.