Sometimes a few seemingly unconnected facts lead to a startling realization. Allow me to tell you about three I recently encountered.
A financial advisor I’m friendly with told me an interesting fact I hadn’t heard before: The average American household buys 1,100 gallons of gasoline a year. That’s a lot–and with the national average price for gas last week at $3.906, that’s $4,297 annually that we’ll spend on filling up our cars. Compared to the price one year ago, it’s $1,147 more a year out of pocket. That’s a big deal to most people and it also means huge profits for the companies that drill oil, transport it, refine it into gasoline and sell it.
That same day, I read a report on power consumption related to the Internet: Every Google search consumes energy equivalent to driving a car three inches. Whoa! How could something as seemingly low-impact as searching on your Web browser exert that much effect? (And if you think it’s not much, consider the number of searches that you alone perform all day long.) Think of the computer servers, transmission wires and power plants working to store and transmit all that data.
The third fact is that if you convert calories to equivalent fossil fuel measures, it takes twice as much energy to produce the number of calories cow’s milk returns to a person, five times as much as a chicken egg and over 25 times the energy from beef. Those measures include the fuel used to run farms and tractors, planting the crops the animals eat and processing all that food for human consumption.
The startling realization I came to is this: Energy truly is the driving force behind everything. And we will need a tremendous amount of energy in the future.
Gasoline demand is rising and will only rise faster. China, which a decade ago had a few million cars in total, is now buying 15 million vehicles a year–roughly the same number as Americans. By the end of this decade, the Chinese government expects over 200 million cars to be on its roads! That’s almost like adding a whole new United States (256 million cars) to the gasoline-buying world in two decades.
Consider too that only 28% of the world’s population has Internet access, and that’s triple the level it was in 2000. More Internet access needs more energy for Web searches and server farms.
What’s more, the United Nations foresees the world’s population growing nearly 50% by 2075, to nine billion people. These people will need food, and as people emerge from the poverty line, they eat more energy-intensive meat.
All of these interrelated trends inexorably lead to one conclusion: the route to making big profits in the stock market is to pursue those companies that will discover, extract, and deliver energy. Energy made the great fortunes of the 20th century and it will make the great fortunes of the 21st century, too.
That is why I’m truly excited to introduce today the Cabot Global Energy Investor newsletter. As editor, I promise that we’ll pinpoint profitable investments within the entire gamut of the energy sector: oil, coal, nuclear, natural gas, biofuels, wind power, innovative energy efficiency advances — you name it. If it’s related to energy and it promises tremendous profits in the stock market, we’ll cover it!
As many of you probably know, for the past three years I’ve been editor of Cabot Green Investor, primarily covering the alternative energy field. I’m intensely proud of the work we did on behalf of subscribers. In those three years we were the only profitable vehicle in the alternative energy space, returning 24% in 2010 (handily beating the broad stock market) and posting an overall profit since the start of 2008. No other investment option–the stock market, green mutual funds, alternative energy exchange-traded funds, other alternative energy newsletters–would have made you money over that time period. None! And we’ve had big winners lately: Subscribers have nabbed profits of over 200% on Polypore (PPO) since June 2010; 30% on Molycorp (MCP) in just six weeks; and over 44% on MasTec (MTZ), among others.
Each of those investments is related to energy. Polypore makes high-tech membranes for lithium ion batteries for electric and hybrid cars; Molycorp mines rare earth elements necessary for energy efficiency and alternative energy applications; and MasTec builds wind turbine infrastructure and natural gas pipelines. And plenty more double- and triple-digit winners we’ve recommended in the Green portfolio since 2008 have been energy related, too.
So why shift gears and launch Cabot Global Energy Investor with that track record? As I looked at other exciting companies in the green energy space, I found a distinct “old” energy handprint. For instance, Codexis (CDXS), which makes catalysts for ethanol and biodiesel production, was started by Shell Oil, which remains a significant shareholder; Oilman T. Boone Pickens has invested heavily in natural gas fueling station Clean Energy Fuels (CLNE); and BP is one of the largest owners of wind farms in the United States. There are dozens, if not hundreds, of similar examples. The distinction between “alternative” and “traditional” energy is blurring. It’s all energy and if it powers our cars, lights our homes, and keeps enabling millions around the world to rise out of poverty to a better life, what does the category matter?
As I’m sure you do, I realize that the prices of commodities, especially for oil, significantly affect the economy and the markets. When I covered the energy markets for Dow Jones before I became a stock-picker, I saw how trends in commodities trickled down into equities in ways many pundits still don’t understand today. While a writer for Forbes, I talked strategy with some of the world’s most successful investors and learned how macro-economic trends are the tides that help you sail to superior profits. And as analyst and editor with Cabot, employing our time-tested method of fundamental and technical analysis, I understand that successful stock market investing needs to be managed to take profits, avoid losses and post long-term gains.
Today, it’s clear that energy will become even more valuable in the future. The U.S., China, Korea, Japan and other nations are striving for energy independence, which in turn drives energy efficiency and new energy sources. At the same time, new energy discoveries in the U.S., Canada and elsewhere are transforming plenty of little known companies in traditional oil and gas sectors into big winners.
If you’re interested in investing profitably in the booming energy sector, I invite you to subscribe to Cabot Global Energy Investor today and join me in powering your portfolio.