Oil vs. New Energy for Big Gains Over Time
I see a lot of people looking to buy.
Well … I don’t believe you’ll see big money in oil stocks.
The longer oil prices stay high, the more “demand destruction.”
The long-term trend for oil is still where it was before this war broke out. We’re going to phase out fossil fuels and move to electric/autonomous vehicles, solar and batteries.
New energy adoption is going to be a no-brainer. And that’s great for us.
Our stocks represent real actual solutions to the problems we face today. (Like this America 2.0 company that cracked the code for the battery of the future.)
See how momentum is building for new energy stocks here:
Everyone is now looking to buy into oil stocks. Just to give you some perspective, two years ago in March 2020, oil prices were negative $36. You had to actually pay somebody to take a barrel of oil in March 2020. Today, as President Biden announces he is going to ban the imports of Russian oil into the United States, oil is somewhere between $120 and $130.
The experts say it could go to $150, $200. I have people tweeting at me that it could go to $500. Maybe these folks are right. However, I can say that none of these folks were tweeting at me to buy oil or try to buy an oil tanker and store oil when people would pay me $36 to take a barrel of oil.
Where Does Paul See Oil Prices Going?
I am going to stick to what I know. I believe the long-term trend for oil is still what it was before this war erupted. We are still on a long-term trend to phase out fossil-based fuels and move to electric vehicles (EVs) in terms of how we transport ourselves and freight transportation.
We are still transitioning to autonomy, which is going to reduce fuel consumption. Potentially we will start to use hydrogen, at least for short haul. Then, in terms of our daily energy usage, moving toward solar power batteries. Nothing of what is going on right now changes that long-term trajectory.
For our strategies and what we do, we are going to focus on innovation because, at some point, maybe it’s three months from now or six months from now, oil prices will have discounted the worst. I put out a recent tweet stream talking about demand destruction.
At high oil prices, the incentive is far greater to actually migrate over to one of these technologies I mentioned — EVs. Implement autonomy to save fuel costs. Use solar power and batteries. Generally speaking, invest more into renewable energy.
No question about it, it’s not going to instantly replace the amount of oil we’re losing as a result of Russia’s oil, nonetheless, in that same tweet stream I did mention the United States has enough oil for ourselves. We have enough carbon-based energy to get through this period of transition.
While there is a great panic about oil prices, etc., there is no equivalent jubilation that as oil prices go higher it makes the threshold for wanting to buy an EV, implement autonomy, move to hydrogen for freight and logistics, to see more solar and batteries.
That threshold now is getting lower and lower. In other words, more and more people are going to be able to look, run the numbers and say, “I put off buying a Tesla. I think the timing is right now. Let’s go do this.”
Regulators from around the country are going to look at companies like one we own in Profits Unlimited — TuSimple — and say autonomy really makes a lot of sense if you are on the highway. What can we do to move this innovation along so when we have trucks on the highway they are using as little fuel as possible?
This also has the benefit of improving the efficiency of the supply chain so things more faster and more efficiently, also reducing our overall energy consumption. Then, on a personal basis, any number of people who were thinking about solar power or batteries and thinking if fuel prices are going up, in all likelihood electricity companies that are still using carbon-based things to generate electricity, those prices are going to go up.
They’re going to look at solar. Maybe it’s time for us to pull the trigger. Each single action means nothing. However, if 100 people in yout city do it, 1,000 people in your county, a few hundred thousand people in your state do it, then you counted out across all the states, maybe my numbers are low.
Will You Transfer to Renewable Energy Instead Of Oil?
Now you start to have a meaningful impact on the demand profile, which means there is more oil than you would think, there is more natural gas than you would think, there is more room for energy prices to start to roll backward. Many people write me and want a magic bullet for high oil and energy prices.
The truth is, the magic bullets are all around us. They have been here for some time. They are EVs, autonomy, self-driving cars, robotaxis, battery storage, renewable energy, solar energy. We have so many magic bullets that are sitting around that even given an incremental adoption after seeing very high oil prices and prices at the pump is going to make adoption that much easier.
For us, that’s great news. It’s fantastic news. Over 2021, especially the last three months and these first three months of 2022, stock market investors have said magic bullet, magic schmullet. What matters is this: interest rates are going up, your stocks are worth nothing.
Now it’s that there’s a panic about war between Russia and Ukraine, your stocks are worth nothing. Meanwhile, the value of our stocks to people, companies, organization and countries is rising.
You can either go with the narrative of the market which went from saying high interest rates are terrible for your stocks and now the reverse concern is that oil prices are going to cause a recession, which would go with low interest rates. That’s not thought about as a positive yet.
No one is really seeing the fact that EVs, autonomy, robotaxis represent a series of solutions that go from short term, to medium term, to long term. For sure, the same thing I was telling you in terms of the adoption is also going to happen in the stock market as any number of people look at our stocks and see these things have gotten really cheap when people sold them because of interest rates.
How Is This Effecting Stocks?
Then they’ve sold down even more as there’s been a general panic about stocks. Yet, look at what this company does. They just reported a quarter. They are still reporting quarters where they are saying our business is still strong. Maybe let’s go in and buy a few shares.
Maybe at first it’s just a few portfolio managers. However, usually, based on my experience, when one manager goes in to buy and experiences a little success that starts to spread where a second, third, fourth and fifth manager needs to compete and buys some for themselves.
Now the buying spreads out and the momentum starts to roll in the other direction. That’s where I believe we are. As you all know, I have wanted a bottom in our stocks for many months now and I have gotten all those calls wrong. I apologize.
Nonetheless, our stocks are cheap, our stocks are growing and our stocks represent real solutions to the problems we face today. They are different than the backward-looking solutions you are reading about in the financial media which is about increasing our investments in oil, increasing capacity.
That’s all fine. I’m pretty sure we’ll do some of that. Nonetheless, the long-term trajectory is all for our stocks. The really big money is not going to be in oil in the long term. In the short term there are investors who own oil stocks and they are making a killing. Good for them.
For us, we are going to focus on innovation and growth and making the really big money. That is made over time. That comes by focusing on a company that provides a valuable product or service that has a long runway where you can see year after year of growth.
That’s where I believe we are currently positioned and are perfectly positioned. At current prices with our stocks having discounted high interest rates that today, in my judgement, are completely unlikely. Now they have discounted a panic about the stock market which is about a recession that’s going to be caused by high oil and commodities prices.
From where they are today, they need to grow quite modestly. 15% will do. The truth is, many of our companies are growing much faster than that. Even better, they will grow irrespective of commodity prices.
These are largely digital companies that make products and services that facilitate the digital side of our economy which is where the greatest value is made on a day-to-day basis in our country. I would tell you if you own our stocks and if you have the money, try to average down a little.
There Is Always A Solution To A Problem!
The prices are simply too low. Generally speaking we tell you not to average down. We tell you to equal weight and let it be. That is still perfectly good. However, if you do have money, average down. Go buy some shares of Zoom. Zoom represents a solution to high gas prices.
Just as it did for the pandemic when people stopped going to the office and started to Zoom. Or Teladoc, which represents a solution in the pandemic and as it does now when you might choose to use that instead of driving to your doctor’s office.
Or Zillow, where the millennial generation and gen Z are still rising in terms of the money they earn are still out there buying houses. There is still a shortage of houses. Rather than fly someplace to look at a house or drive, you use Zillow.
If I go through our companies, literally every single company represents a solution to a problem that people see as a result of the war that is going on, no different than how it was in the pandemic. I believe the future is incredibly bright. I look at our companies, in terms of the solution set they offer they are just one of a kind.
They are amazing. There is nobody creating anything like it again. Then when I go and look at the price that these companies are trading for in terms of their stock prices, you all know our stocks have gotten shelled. There are stocks like Zoom that are down 80% from the high.
They trade at very low valuations. These valuations represent low risk in my judgment. Remember, what we do is opinion and not advice. In the end, all your decisions and responsibility lies with you.
What’s required for us to get what we want? We want to see gains. We want to see our stocks rise. Well we need a little bit of demand. We need it to come in for the stocks. I believe we have the underlying conditions for it. The Federal Reserve was planning to raise interest rates and the market went with the idea they were going to do it seven times in a row.
It’s now down to three or four times in terms of market expectations. That’s in our favor already. Second, we needed growth. The companies have never stopped growing. They are all growing. From the pandemic where many of them experienced growth rates of 50%, 100%, 300%, they have actually grown on top of that.
When the markets have expected them to show declines and priced them as if those pandemic gains were one-time things. We have the macro situation moving in our favor. Company growth is in our favor and always has been. The last thing we need is for the market to shift expectations.
I believe the combination of interest rates, the growth, the scarcity of growth available in the stock market, that will bring the demand. Then I believe we are going to see significant gains that are going to run for many years to come. I know many of you are sitting on large losses.
I would still say to you what I have been saying and sometimes it may sound like hype, but truthfully, all the big money is made over time. All the great investors make big money over time. People are thrilled to make short-term money, but the big money is made over time.
That comes from being strong hands, being disciplined, being unemotional, focusing on facts and keeping your mindset to what we say all the time: Being bullish, optimistic, positive. That’s where I am. I am BOP. Be strong hands, be BOP. Come back again next week.
Until then, this is Paul saying bye.
Did You Sell or Hold Strong Hands?
Our stocks have been hammered. The market will never make it easy. It will test you.
And I want to know — did you sell when we were down or did you hold Strong Hands?
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Editor, Profits Unlimited