Checking in on the 5G global rollout … how to align your portfolio with this megatrend … oil hits $90 for the first time since 2014 … checking our oil trades

 

In today’s Digest, let’s take a break from focusing on the market correction.

As we’ve noted by diving into historical data throughout this week’s Digests, markets are incredibly resilient. The wisest course of action is simply to let this weakness run its course (while sticking to your specific investment plan, of course).

So, today, let’s talk about two sectors poised for growth.

***Bargain prices on leading stocks from one of this decade’s the most transformative trends

About two years ago, the coming era of “5G” was all over the headlines.

We were told the speeds would be blazing fast, the new technologies it would enable would be mind-boggling, and it would usher in a night-and-day difference in our online experience.

What happened?

Well, 5G is rolling out as we speak, and it’s still on track to be as transformative as predicted. The only difference is the financial media has moved on to the next shiny object.

But legendary investor Louis Navellier noted the 5G progress:

5G adoption keeps ramping up across the globe at a blistering pace.

Thirteen new countries rolled out new 5G deployments over the year prior to Nov. 30, bringing the total to 112. Meanwhile, the total number of 5G deployments shot up 391% over the same timeframe to 85,602.

While the vast majority of the fastest 5G speeds are available outside America right now, the U.S. has the widest 5G availability, with 49% of the population having access to a 5G service.

The obvious beneficiaries of the 5G rollout are the smartphone manufacturers and network providers.

In Louis’ recent issue of Market 360, he points toward Apple, Samsung, Google, and Motorola as 5G smartphone manufacturers, Verizon and AT&T as network providers, and Qualcomm as a 5G chipmaker.

But companies like these barely scratch the surface when it comes to ways investors can align their portfolios with this 5G megatrend.

Back to Louis:

5G phones are just the beginning for this technology.

5G will also enable billions of streaming devices to connect, interact and collect data from each other, unlocking untold levels of productivity and innovation for consumers, industries and governments.

Big breakthroughs stemming from other groundbreaking technologies like artificial intelligence (AI), driverless cars and augmented and virtual reality will finally get the lightning-fast connectivity required to realize their full potential.

***The wealth-generating opportunities are so expansive that Louis recently held a live event, exclusively dedicated to how to play 5G

Every now and then, a sector or trend emerges that produces an abundance of winners. Far more than is typical.

When that happens, it creates a “strike while the iron is hot” environment for investors. It’s a temporary moment of focused outperformance that can transform portfolio returns.

It’s happening today with 5G, which Louis recently detailed at his Big Bet Summit.

What’s happening is that Louis’ quant-based algorithms have been triggering a slew of 5G buy signals, having identified massive growth potential sector-wide. Given this, Louis is making a “big bet” on a handful of the strongest 5G stocks. If you missed the Big Bet Summit event, you can click here to watch a free replay.

I bring all this up since today, Louis is releasing a new 5G pick for this portfolio.

I’ll add that Louis believes the market is grossly oversold and due for a sustained bounce. If so, then buying these 5G winners at prices that have been dragged down by the recent market pessimism looks to be a great entry point.

For more of Louis’ research on 5G and to access this latest recommendation, click here.

***Meanwhile, oil just topped $90 for the first time since 2014

Yesterday, Brent crude futures, which are the international oil benchmark, topped $90 a barrel.

This is largely attributable to growing geopolitical tensions between Russia and Ukraine. But that’s not to discount the tight global supply thanks to a healthy rebound in demand.

If a Ukraine invasion does happen, oil will spike. But even if we’re able to avoid this conflict, the global oil market is so tight that upward price pressure is likely.

Eric Fry has been all over this opportunity.

For newer Digest readers, Eric is our global macro specialist and the editor behind Investment Report. As a macro investor, he evaluates markets and asset classes from a big-picture perspective to identify attractive opportunities. Such a market approach puts oil directly in his crosshairs.

Last week, we highlighted analysis from Eric pointing toward the supply/demand imbalance in oil:

Most folks assume that OPEC and others could easily ramp production to satisfy any significant surge in demand. But that assumption rests on a frail statistical foundation.

The U.S. has supplied almost all of the world’s crude production growth during the last decade, not OPEC. Pulling that rabbit out of the hat a second time will not be easy, as U.S. shale production topped out two years ago…

Net-net: Bountiful new supplies of crude oil seem highly unlikely.

A tightening oil market, coupled with a rising inflationary trend, provides ample reason to expect oil stocks to deliver market-beating results in 2022.

I’ll add that earlier this month, Goldman Sachs called for Brent crude to hit $100 by the third quarter.

But this isn’t just a 2022 trade. There are tailwinds behind oil that extend deeper into the decade.

Eric has pointed out that the U.S. Energy Information Administration says the total number of internal combustion vehicles on the world’s roads will not peak until 2038.

Meanwhile, because crude demand from other end users will continue growing past that date, the International Energy Agency (IEA) expects worldwide oil demand to be at least 25% higher in 2050 than it is today.

It won’t be a straight shot north. But oil has more gains in it. There are too many bullish macro factors at work to suggest we’re peaking today.

***How might you trade this setup?

I’ll reserve Eric’s recommendations for his Investment Report subscribers. But let’s review the three trades we highlighted here in the Digest almost a year ago.

The first was the Energy Select Sector SPDR Fund ETF (XLE) that holds oil heavyweights including Exxon, Chevron, ConocoPhillips, Schlumberger, Occidental, and Valero to name a few. This was our “broad sector” play.

The second was Diamondback Energy (FANG), which is a Texas-based energy exploration company. This was more of a concentrated, returns-focused trade.

And the third was Exxon (XOM), the massive multinational oil and gas company. This was our cash-flow trade, since Exxon pays a massive dividend.

As I write, the three trades are up, respectively, 53%, 102%, and 51%.

We last checked in on this trade in our December 16th Digest. In that issue, we continued recommending the trade, though we noted that XLE was flirting with its 50-day moving average, so cautious investors could wait a few days to see which direction the price broke.

Well, all three trades broke higher.

As you can see below, each trade is up more than 21% since mid-December while the S&P is down 7%.

Given Eric’s research, we’re still bullish on these trades. However, if global leaders successfully deescalate the Russian/Ukrainian conflict, oil could pull back as the world breathes a sigh of relief.

Regardless of how that plays out, we believe there’s more upside for oil over the medium-term.

For more of Eric’s research on the opportunity as an Investment Report subscriber, click here.

We’ll keep you updated here in the Digest.

Have a good evening,

Jeff Remsburg