How to profit from the energy crisis in Europe

The energy sector has been on fire for much of 2022. From December 31, 2021 through mid-June, Energy Select Sector SPDR ETF (NYSEARC:XLE) jumped almost 52%. By comparison, the S&P 500, Dow Jones and NASDAQ were down around 22%, 16% and 31%, respectively.

However, the energy sector’s momentum stalled in mid-June after oil prices, which had climbed as high as $130 a barrel in early March, fell below $120 a barrel and failed to return above this level. Wall Street algorithms attacked energy stocks and investors fled fears that energy companies would suffer if oil prices continued to fall.

However, energy companies still reported wave after wave of better-than-expected results. And while most have slipped lower on the heels of reports, since early August energy stocks have resurfaced with a vengeance…

The thing is, even though oil prices are down, I remain very bullish on the energy sector. in today Market 360we are going to talk about a major tailwind for the energy sector…and i will share when i post my next batch of fundamentally superior energy actions

The energy crisis in Europe

Ever since Russia invaded Ukraine in February this year, Europe’s dependence on Russian gas resources has been a central issue. In 2021, an estimated 40% of natural gas in the European Union (EU) came from Russia, with Germany, Europe’s largest economy, being the largest importer.

When Russia restricts supplies, continental Europe suffers. And that’s part of the reason why we’ve seen global gas prices rise over the past year.

The EU has said it will cut Russian gas imports by two-thirds this year. However, this is much easier said than done.

You see, normally energy prices fall in the fall as seasonal demand decreases. But right now, natural gas prices remain at nearly 14-year highs.

Estonia is proud to build a large LNG terminal to help Finland and other European countries diversify away from Russian natural gas. Spain has also proposed a new gas pipeline to France that would deliver natural gas within a year.

Unfortunately, winter is approaching and the German director of the BNA, Klaus Muller, which is the agency in charge of rationing the supply of natural gas, said: “If we do not reach our target (20% reduction consumption of natural gas), there is a serious risk that we will not have enough gasoline.

To complicate matters further, Russia’s Gazprom recently announced that it will shut down the Nord Stream gas pipeline for three days of maintenance in the coming weeks. Consequently, natural gas prices are expected to remain abnormally high.

Germany should lose its competitiveness and could be forced to move certain operations to lower-cost countries. Unsurprisingly, due to possible power shortages, Germany postponed the closure of its three remaining nuclear power plants that were due for decommissioning at the end of the year.

With the help of natural gas rationing, we hope that Europe will have enough natural gas until alternative LNG supplies and pipelines can be added and they can finally separate from Russian natural gas. .

And if the EU succeeds in reducing Russian crude oil imports this year, crude oil prices could follow natural gas prices and climb back to recent highs.

Energy stocks remain fundamentally strong

Bottom Line: While I think crude oil prices could temporarily drop to $80 from $85 a barrel as seasonal demand declines, Russia’s bad behavior could push crude oil prices up in the event of a hard cut towards Europe.

All in all, I’m very proud of my big energy bet and expect energy stocks to continue posting very strong quarterly earnings for at least the next two quarters.

In fact, my Growth investor stocks just posted their biggest monthly gain since April 2020 and beat the S&P 500 by almost 3 to 1, thanks in part to my big energy bet on our Growth investor shopping list.

Over the past three months, the analyst community remains positive about our Growth investor actions and revised its average consensus earnings estimate up 21.1% over the past three months. The second quarter announcement season is now over, and I am immensely proud that my average Growth investor the stock posted annual sales growth of 62.3% and annual earnings growth of 455.7%. Even better, my average Growth investor shares are trading at just 10.6 times the median of expected 2023 earnings.

On Friday I will publish my Growth investor September monthly issueand I share why I think Growth investor equities will continue to dominate the market as we head into the fall. Additionally, I will be adding four new actions to my Growth Investor Buy Lists – food, crude oil and natural gas stocks which continue to show the best earnings and sales growth going forward.

My monthly issue – including my latest purchases and Top Stocks – will be available after the market closes on Friday. If you want to read the issue as soon as it is available and follow my buying advice, join me at Growth investor today. Once you sign up, I’ll send you five exciting special reports – The Kings of Scalability: 3 Stocks to Buy Now, The Network Effect: The Most Powerful Wealth-Building Force in History, Portfolio Destroyers: 10 Time Bombs to Sell Now, Stock # 1 for the driverless car revolutionand The AI ​​revolution – yours, absolutely free.


Source: InvestorPlace, unless otherwise stated

Louis Navellier

Mary I. Bruner