windfarm
26
Sep

Shifting From Tech to Energy

I have been somewhat busy this morning, buying and selling stocks – readjusting the portfolio as I deem fit. I am sensing a lot of fatigue in high beta tech names, namely the ones that have ran hard in 2016-2017 – that will likely last at least a few months. Tech appears to be dead money for now, albeit I am nowhere near being bearish, and certainly would not short this industry. As such, I sold out of AMZN at a slight loss, and will be reallocating those funds in due time. I still think AMZN goes higher, just not now.

Elsewhere, oil has found somewhat of a bottom, triggering a surge in financially stable energy names over the past 1-2 weeks. I am seeing a rotation into energy, one that I believe has legs and will slowly grow into a bigger trend, being that this industry has consolidated quietly – doing absolutely nothing for almost 2 years now. One needs to look no further than the recent action in XOM, CVX, RDS, OXY, APA to see that energy is back indeed alive and well again.

The thing about the energy sector is that unlike tech, high yield is very much an option, if not a requirement, when choosing stocks. Furthermore, this sector has also been quite heavily shorted, which of course entails violent moves higher in bull markets – in other words, you want to be on the long side.

I am not particularly bullish on oil just yet, so rather than buying companies whose performance is influenced primarily by the price of oil, I am more interested in those that are already executing well, and would do even better in an environment of higher oil prices. My plan is to put together a portfolio that more or less includes the following caveats:

  • Dividend yield above 5%
  • Increasing dividends steadily over the past few quarters/years
  • Stable growth, defined by stock price in uptrend
  • Big Oil, Alternative energy, or an ancillary to either

Given the above, my favorite picks are:

PEGI – solid wind power portfolio. I like its growth prospects and am long.

NYLD – similar to PEGI, but I prefer PEGI.

BEP – Another Yieldco, trying to grow its dividend by 5-10% annually

RDS.A and BP – Big oil, enough said. I wouldn’t buy it here, wait for consolidation.

WLK – Unrelated, chemical business, that I think has plenty room to grow

On the same token, I would stay away from Airlines, high beta tech, and China/Asia stocks for now. Never would I have thought I would be buying utility and alternative energy stocks, like an old man looking to retire. To be clear, I hate buying stocks of this nature, and would much rather be loaded up in ‘fashionable’ tech stocks that move 10% for no reason, but my intuition tells me that the energy sector will soon get its shine.

At that, I bought more PEGI today, lowering my cost basis to $25.72.