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By Jim Woods
Co-author, Billion Dollar Green: Profit from the Eco Revolution
It’s the lifeblood of industrial society and the master resource powering the 21st century. We’re talking energy here, and in
all of its various forms. Petroleum, shale oil, gasoline, natural gas, coal and even nuclear energy are employed by modern civilization
to keep the world’s engine humming. Fortunately, a keen sense of which companies are at the forefront of satiating society’s energy
appetite also represents a great way to keep your portfolio’s engine humming.So which energy stocks and ETFs are likely to power your portfolio toward high-octane profits? The following dozen picks, delivered
by our OptionsZone experts, will provide you with a great platform for drilling down into the various ways to add juice to your
investments.So, fire up the engines — and let’s get energized with these 12 energy stocks and ETFs.
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Energy Play #1: United States Natural Gas Fund (UNG)
By Michael Shulman
The best energy play right now is natural gas. Coming off a nearly seven-year low in April, natural gas prices (around $4) are
still far below last year’s high (nearly $14), so there’s huge upside potential in the coming months and years.The way to play this is with the United States Natural Gas Fund (UNG). If you’re looking for an options trade, buy
the UNG Jan 2010 20 Calls (UNEAT) under $1.80. And be prepared
to roll them or otherwise change them out with some frequency as the price of natural gas rises steadily over the next two to
three years.UNG is one of the Top 10 Summer Stocks that will heat up your portfolio.
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Energy Play #2: United States Gasoline Fund (UGA)
By Nick Atkeson and Andrew Houghton
The United States Gasoline Fund (UGA) is a pure play on U.S. gasoline
prices. We are going into a seasonally strong time for U.S. gasoline prices as the summer driving season is about to begin. With
households being on the edge of the recession,
we may see an increase in vacations taken in the United States by car.Additionally, with China’s economic stimulus programs in full swing, we are seeing stronger demand for gasoline from an increasing
number of Chinese who would rather drive than ride a bike or walk.
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Energy Play #3: Linn Energy LLC (LINE)
By Sam Collins
Linn Energy LLC (LINE) is an energy group that explores,
develops and acquires natural gas and oil properties in the United States. It broke its bearish resistance line in April and executed
one of the most bullish of all technical signals, the gold cross, in early May.Linn is covered by five analysts with a “strong buy” rating from one, a “buy” from three, and an “underperform” from one.
Want to learn more about technical analysis? Visit OptionsZone’s Technical Analysis 101 section.
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Energy Play #4: Market Vectors Coal ETF (KOL)
By Chris Johnson and Jon Lewis
Coal is another commodity that has been on fire of late. In fact, Market Vectors Coal ETF (KOL) has
more than doubled off its March low to sit at a 2009 high. But it hasn’t been due to rising coal prices.Domestic coal producers put in a solid quarter of earnings reports, underscoring their intrinsic strength. And overseas demand,
especially from China, has been strong.Looking for more great trading ideas? Check out the Top
10 ‘New Frugal’ Stocks.
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Energy Play #5: Northern Oil & Gas (NOG)
By Tobin Smith
Northern Oil & Gas (NOG) is an exploration-stage
company that engages in the acquisition, exploration, exploitation, development and production of oil and natural gas properties.
The company has 70,000 net acres in the Bakken Shale formation in North Dakota, which is the hottest oil drilling area in the
United States.The company has partnered with all the major players in the area — Continental Resources (CLR) ,
EOG Resources (EOG), Hess Corporation (HES) ,
etc. — who need NOG because of its acreage. NOG is currently participating in the drilling or completion of 18 additional wells
in the Bakken and Three Forks shale regions in North Dakota. None of that revenue is booked yet — buts it’s coming … in a gusher!
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Energy Play #6: Valero Energy Corp. (VLO)
By Nick Atkeson and Andrew Houghton
Earnings estimates for Valero Energy Corp. (VLO) are
$2.40 this year and $3.34 next year. On next year’s expected earnings, the stock is trading just about six times. The stock has
been depressed partly because it reported a loss in 2008 on a large goodwill charge — a non-cash charge.Valero is the lowest-cost refiner in the industry. Some industry experts believe the price per barrel of oil will approach $80
from the current $67, as marginal demand continues to increase from Chindia and the United States goes into the summer drive season.See why one expert thinks oil prices are
poised to jump as much as 70%.
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Energy Play #7: XTO Energy (XTO)
By Sam Collins
This gas and oil developer, driller and producer fell from a high of over $73 in June 2008, to under $24 in October, and then
formed a base with support at around $30 and traded there for five months. Then, in March, high-volume buying occurred, which
triggered our internal indicator, the Collins-Bollinger Reversal (CBR),
to flash a series of buy signals.After breaking through the 200-day moving average, XTO Energy (XTO) gapped
to a high of over $45, and is currently pulling back on profit-taking. XTO could stabilize at its current price, and a technical reading gives a target of $55 to $60.
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Energy Play #8: Kodiak Oil & Gas (KOG)
By Tobin Smith
Kodiak Oil & Gas (KOG) engages in the exploration,
exploitation, acquisition, and production of natural gas and crude oil. It’s targeting the hot Bakken Shale region, as well as
the Green River Basin in Wyoming, where the company is developing the Baxter Shale formation. KOG is jointly developing its acreage
with bigger player Devon Energy (DVN). Kodiak drilled
four wells with Devon in 2008, but is delaying completion until energy prices recover.KOG just issued equity in a secondary offering and
raised $7.15 million to develop its properties. The company reported a loss in the first quarter of 2009, but had no debt. And
as new fields come online, KOG will rock.
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Energy Play #9: United States Oil Fund (USO)
By Michael Shulman
Long term, the price of oil is going up due to a fall in production that is outpacing the fall in demand. However, short-term
trading in oil is being driven by a) the Street’s misguided belief that the economy will bottom and turn around in Q4 and b) the
Iranian election. If Iranian President Mahmoud Ahmadinejad is re-elected, oil prices may climb; if he loses, they may fall. So,
play the momentum and buy July calls on the United States Oil Fund (USO). This is a high-risk trade that could fall apart
if Ahmadinejad is thrown out of office.And, for the serious gambler out there, if you think the Iranian presidential election, scheduled for June 12, will move oil
prices drastically, you could do a mini “Black Sawn” trade. Buy both the USO July 50 Puts (USOSJ) and
USO July 70 Calls (UNAGR). That will definitely impress people
at your next neighborhood barbecue! Of course, you could get barbecued yourself. If the price of oil does not move sharply, you
will lose on both ends.Put your options trading knowledge to the test. Test Your Options IQ.
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Energy Play #10: Market Vectors Nuclear Energy ETF (NLR)
By Chris Johnson and Jon Lewis
Companies in the nuclear sector have sparked in popularity as the energy sector feels pressure to “go green.”
Market Vectors Nuclear Energy ETF (NLR) offers an
easy way to avoid the stock-specific risks of investing in the nuclear sector, while benefitting from what is likely to be a long-term
increase in demand for nuclear energy.Find out how to Close Out Option Trades for Triple-Digit
Profits.
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Energy Play #11: McMoRan Exploration Co. (MMR)
By Nick Atkeson and Andrew Houghton
If oil prices continue to move up, the small-cap oil plays should appreciate the most. McMoRan Exploration Co. (MMR) may
see extraordinary appreciation. The CEO believes there is a huge reserve of oil in the Gulf of Mexico under where much of the
shallow wells were drilled. The CEO is one of the world’s great geologists, and has a multi-decade track record of finding significant
natural resource reserves in places others never thought to look.The CEO is so excited about the opportunity that he personally purchased 500,000 shares at about this level in March, 2009.
If his find is real, some analysts see MMR rising from
$6 to about $100.Like the sound of that kind of return? Then check out 7
Penny Stocks That Could Change Your Life.
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Energy Play #12: Rex Energy Corp. (REXX)
By Tobin Smith
Rex Energy Corp. (REXX) is an independent oil and
gas company with 65,000 net acres in the Marcellus Shale gas formation in Pennsylvania, which has become the premier natural
gas play in the Appalachian Basin. And REXX is devoting
70% of its exploration budget to this area in 2009.REXX had its borrowing base of $80 million reaffirmed
by its lending group, which is key. The banks investigated the company’s reserves in the context of the future oil and gas prices,
and kept their lending line intact. This says a lot about the company’s prospects in a world where credit lines are being cut.
New production was stopped because oil and gas prices fell to such low levels, but with energy prices on the rise, REXX is
ready to start up the pumps and let it rip.More trades from our analysts:
