Our trade of the decade thesis is playing out nicely…
The idea is to select one overvalued asset class and one undervalued asset class. This “trade” doesn’t play out over the coming weeks or months, but rather it’s about investing in a decade-long trend.
In 2020, we selected energy as our undervalued asset class.
Why? Several reasons. First, the trade was dead money in terms of market sentiment. But that’s not all. Following the crash in shale oil production in the mid-2010s, investors largely avoided the energy space.
And the sector saw chronic underinvestment. Yet the world still needs conventional fossil fuels. And it’s getting repriced with a vengeance:
Over the past five years, ExxonMobil has beaten the returns on the Nasdaq, even amid the attention the AI boom is getting. (Source: Karel Mercex via X)
There are plenty of ways to trade the oil market. We’ve looked at a few of the majors before, and hold one in our Grey Swan Investment Fraternity model portfolio.
But some of the best investment opportunities today include income-producing energy plays.
Income is where energy stocks outperform other resources, such as gold. Every barrel of oil that’s sold creates stable cash flow. And demand for oil tends to be steadier than gold, as people need to gas up their cars.
Plus, today’s investors are starved for income. Tech stocks may be getting the market limelight, but they offer poor, if any, yield.
Some corners of the energy market offer not just steady income, but massive income compared with the rest of the market.
If you need current income, it’s great. If you don’t, you can always reinvest the dividend. That’s tougher to do with low-to-no-yielding tech or even gold stocks.
Today’s Grey Swan Pro looks at an energy play with a 7% yield and is positioned to benefit from a renaissance in American energy production and investments — details here.
~ Andrew
P.S. Last week on Grey Swan Live!, we returned to one of our favorite themes: Argentina’s economic turnaround. While DOGE met the Washington establishment and the establishment won, Mieli’s Argentina has truly taken a chainsaw to the administrative state.
Our man on the ground, Joel Bowman, author of Notes From the End of the World, provided a key update on what’s likely to happen next in Argentina, as well as a foreign perspective on what’s happening in the U.S. ahead of the midterm elections – election integrity or not. Replay is up on the site.
Addison is traveling and filming some of our latest research this week, so no Grey Swan Live! this Thursday. We’ll be back next week.
