Retirement Income Options: Energy

Aemetis, Inc. (AMTX)BRK.ABRK.BCVXNFEOXYPBWPRXLE

Summary

  • The energy picture around the world is not likely to get materially better until after next summer.
  • What is bad for Europe and other energy deficient countries is good for United States energy companies (as well as, OPEC and Russia).
  • Do not underestimate President Biden’s ability to be crafty as he makes sure allies have gas, the SPR gets refilled and clean energy adoption stays on track.
  • Here are my picks for energy stocks and ETFs to play the energy picture.

Retirement Income Options offers my top option selling ideas for the week. The stocks and ETFs are from the quarterly “Plug & Play” lists and Global Trends ETF.

Make sure to read “Using Retirement Income Options” and “Technical Trading Basics” in the Getting Started area so you can follow my methodology and reasoning.

The following trades are generally for six and seven figure accounts. Remember to check out the noon Monday Retirement Income Options webinars live or on YouTube.

Energy 

I have not written a Retirement Income Options for a few weeks because I wanted folks to let the market fall and for open positions to clear out. So, here we are lower and closer to knowing what October options will do on Friday.

This week I want to cover energy stocks and a few others. 

With OPEC’s cut to oil production it is clear that energy prices will be staying higher for a bit longer – probably the next year. Eventually, energy prices will get outright cheap again, but there is a lot of work to be done on that first.

In the Global Trends ETF Report for October I said this: 

Energy Thoughts
Energy Thoughts (Kirk Spano)

Way back in September of 2021, I did an interview with Forex Analytix and one of the topics of conversation was whether President Biden was willing to let oil prices be higher to support clean energy and EV adoption. I said for a while, but not all the way to 2024. I think that is the path we are on. 

Energy will be higher through next summer, but by autumn we will see several things: 

  • even more U.S. production.
  • deals with Canada and U.S. oil to refill the SPR.
  • even more EV adoption.
  • another record year of solar installations.

But, none of that is here now. Not yet. Let’s look at the first two points.

Saudi Arabia and Russia are causing the price of oil to be higher. There are geopolitical ramifications here that outweigh pricing and market share that mean that won’t stop soon. 

The U.S. has the ability to push more oil and gas into the market, but that takes time to make up 2mbd of less oil from OPEC+. In addition, the United States has to refill the Strategic Petroleum Reserve soon. 

This lines up very well for U.S. oil companies with large Permian operations and/or offshore wells, which have gone from the verge of bankruptcy just 2 years ago, to gushing cash and wiping out debt. 

That makes certain companies buys on the recent consolidation. There’s very likely to be a breakout, not a breakdown for certain stocks. It won’t last forever, but, it will last for at least a couple years I would think. 

Next we have clean energy and EVs. The U.S. and EU are fully behind this with tax incentives and development grants. 

Importantly, high oil and gas prices spur people to make the switch. To be sure, that is happening mostly by people in the top 20% financially, but that is a large group to influence future of energy. 

We should be betting on both a rally in oil and gas stocks over the next two years, as well as, longer term growth in clean energy adoption. 

Here are my energy ETFs and stocks.

Oil & Gas

Safest stock: Occidental Petroleum (OXY) I have no doubt in my mind that Berkshire Hathaway (BRK.B) is buying this company. They got government approval to buy half the shares already. Their warrants are priced at $59.62, so that acts as a floor on share prices. 

  • Sell OXY $60 January puts for $4+

Most upside stock: Permian Resources (PR) has a very cheap asset base in the Permian and merger synergies from the tie up of Colgate and Centennial. With higher energy prices, this stock can run a long way, especially as the market comes to realize their great “rock” position and excellent low leverage balance sheet. 

  • Sell PR $8 January puts for $1+

Natural Gas stock: New Fortress Energy (NFE) is perfectly positioned to keep growing on European and global demand. Their recent sale of a Brazilian joint venture further deleveraged their balance sheet and puts them on a path to an investment grade rating. Their unique FAST LNG is growing fast. Stock is setting up for a wave 5 up which could take it north of $100/share.

  • Sell NFE $45 December puts for $4.50+

ETF breakout candidate: SPDR Select Energy (XLE) is 40% Exxon (XLE) and Chevron (CVX) who are most likely to cut deals with the U.S. government to refill the SPR. Other large oil companies, midstream and services are other big holdings. In short, I think the whole complex is solid, though not without risk. If the Fed damages the economy, then these can slide. I think it is more likely we see these stocks lead a rally, along with tech and clean energy stocks, in 2023-4. 

  • Sell XLE $80 January puts for $6+

Of note, here’s Shooter’s chart which indicates it can correct to the upper $70s and then bounce. 

XLE Harmonics
XLE Harmonics (Shooter Henderson)

Decarbonization

Biofuels & Carbon Capture stock: Aemetis (AMTX) continues to add contracts and future revenues as it completes its buildout. It has some impressive shareholders. It is only a matter of time in my opinion before investors “discover” this stock. Undervalued by 80% or more by my analysis. 

  • Sell AMTX $5 January puts for .55¢+ (remember to start at the ask if it’s higher and work your way down over an hour or two).

Clean Energy ETF: Invesco Wilderhill Clean Energy ETF (PBW) is a nicely balanced global all-cap selection in this sector. It recently hit my old bottom fishing price. I’ve adjusted the chart to include the Armageddon Zombie Apocalypse. Shooter sees $33ish as a bottom. This is  my first scale in put to sell. If PBW falls to middle $30s, I’ll sell another.

  • Sell PBW $40 December puts for $3+ (this market is thin right now, so, you’ll have to set a GTC order). 

Related Articles

2022 Forecast Review & Update

Here is my midyear review available to all subscribers. It covers my thoughts on how accurate our forecast was, the strength of our cash position and what to do with it soon. Holdings included for my aggregate managed accounts.

close

Get alerts when we publish a new idea!

Get Our Investment Ideas
Fully Confidential