Let’s debunk some common misconceptions about the energy sector.
Not the clean energy sector, but the traditional energy industry with coal, oil and gas products.
Over the years, investors and the general public developed a pessimistic attitude about the future of crude oil. They believe that clean energy — wind power and electric vehicles — will one day dominate the market.
But this approach ignores the still-booming oil and gas industries and the long-standing transitional period to green energy.
That means we still have a few more years’ worth of investing in this sector.
So let’s break down the industry…
About the Oil and Gas Industry
Under the umbrella of the broad energy sector, there are two industry groups to look at: the oil and gas exploration companies and the oil and gas service companies.
Oil and gas exploration companies work to find oil and gas around the world. The U.S.-based companies include Apache, ConocoPhillips and Exxon Mobil.
Oil and gas service companies provide the manufacturing and maintenance of equipment used to extract oil. Oil and gas service companies include Baker Hughes, China Oilfield Services and Halliburton.
These are the types of companies I mean when I talk about the “broader industry” and a “broad sector.” And right now, these stocks are down … which means these sectors are down.
Oil and gas exploration companies are down 70% from their 2014 highs. And the equipment stocks are down 83% since 2014.
This isn’t uncommon. But when an entire industry is down because its stocks are oversold, you have to become a contrarian. This is important; be a skeptic.
My Approach to an Oversold Sector
I tend to deviate from the pack as an investor. My success is, in part, due to my belief in the phoenix.
A phoenix rises from unassuming ashes. It’s reborn into a beautiful and powerful creature.
Stocks in the traditional energy sector are ready for their phoenix moment.
It will come sooner or later.
When it does, we should be ready.
Which is exactly why I’m recommending Delek Logistics Partners LP (NYSE: DKL) to you today.
Delek Logistics Stock Is a Buy
Delek Logistics is a middleman for the crude oil sector. It doesn’t make equipment or extract oil out of the ground. But it does help sell those crude assets.
Despite the overall decline of the oil and gas industry, Delek’s quarterly dividend has risen over the past 31 quarters. And the company hasn’t missed one payment…
In fact, it’s soaring!
Delek Logistics’ Green Zone Rating on February 4, 2021.
With an overall Green Zone rating of , Delek Logistics sits poised to outperform the market over the next 12 months.
Quality — Our quality metric focuses primarily on debt management and profitability. DKL’s stock scores best here at 76. With 31 quarters behind it, all without one missed dividend payment, I believe Delek’s quality score will continue to rise as it moves forward.
Value — DKL’s stock scores a 74 for value. This means that the stock is And since investors are selling off shares of their energy stocks from traditional energy because of the push for green, renewable energy, the price of traditional energy sector stocks will lower.
Growth — DKL’s growth scores a 71. Realize, though there is a shift from traditional energy to renewable energy, the transition from one to the other will take time and, well … energy. Specifically, traditional energy — such as oil to power the necessary equipment — meaning that DKL still has room to grow as a middleman in the traditional energy industry.
Size —DKL scores 73 when it comes to size. Though size can be important, it won’t necessarily make or break a stock. But smaller stocks tend to outperform larger ones. Being a small-to-medium-sized company, Delek falls more favorably on the scale.
Momentum — DLK scores a respectable 61 based on momentum. The stock has been trending higher since March and shows little sign of slowing down.
Volatility — Low-volatility stocks tend to outperform high-volatility stocks over time. So, a higher score on this metric means that the stock is less volatile. DKL scores a 32, meaning it is more volatile than most stocks in our universe.
To good profits,
Adam O’Dell
Chief Investment Strategist
Adam O’Dell is the chief investment strategist of Money & Markets and has held the title of Chartered Market Technician for nearly a decade. He is the editor of Green Zone Fortunes, the trend and momentum options-trading powerhouse Home Run Profits and the time-tested switch system 10X Profits.
P.S. One caveat: There is an individual stock in IYK that rates 90 overall within my system, and my Green Zone Fortunes readers just locked in a 100% profit on it in less than two months. I think the stock’s rally is just getting started … and I’d love to share the details with you. Check out my Millionaire Master Class here for more details.
