Sunday, March 05, 2006

Invest in oil & energy

Economics 101 teaches that whenever there's a shortage of something, the sellers of it make more money. I saw that firsthand in the 70s with oil -- and have been investing in oil and energy companies more or less ever since.

This is a volatile sector, but despite the enormous gains of the last few years, the long-term prospects appear bright. Unless we solve terrorism, prevent more Gulf of Mexico hurricanes, and find a lot more cheap oilfields, energy stocks should be nice gainers for the next decade or two, anyway. And not just oil and natural gas stocks, but nuclear, solar, fuel cells, and other alternative energy technologies should do well.

There are lots of ways to invest. Simplest is a mutual fund, and a number of fund families have them. For instance, Fidelity has their Select Energy (trading symbol FSENX) and Select Energy Services (symbol FSESX) funds. There are several of exchange-traded funds (ETFs), traded through brokers like stocks, such as the popular Energy SPDR (trading symbol XLE) and Oil Service HOLDRs (symbol OIH).

Unfortunately, as far as I know, there is no "Energy Income" mutual fund as yet. This is by far the most conservative way to invest, especially considering most energy income stocks pay 8% - 15% in annual dividends. (Try that at your local bank!) Canadian royalty trusts in particular are exploding in popularity, and they have great tax advantages too.

If you'd rather trade individual stocks, you should consider an advisory service. One I've used for several years, and like a lot, is Czeschin's Oil & Energy Report. He has an income portfolio that gained about 100% during the 2000-2002 market "crash" years. Amazingly, he doesn't have a web site, but the U.S. toll free phone number is 1-888-847-5739. Their Email is (but despite the Philippines address, Bob Czeschin is from the U.S.).

Another one worth a look is the Real Wealth Report which covers not only energy, but other natural resource investments as well (including gold).

Finally, check out ChangeWave Investing. They are a generalized investment newsletter, but have a heavy dose of energy stocks including Canadian royalty trusts. Not only will you learn a lot from Tobin Smith, you'll be entertained as well. With the help of his unique network of informants working in various industries, he has the pulse of the economy. He called the market bottom in 2003, and for too long I didn't believe him -- to my regret.


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