Wayne is Crazy Some of the Time
When it comes to following the herd or being in the herd, I like to think that I am usually not one of the many in that crowd. For example, I do not own any shares of Tesla (TSLA) unless TSLA happens to be in an ETF that I own. However, given the types of ETF’s I purchase, the slice of TSLA I own would be insignificant. Clearly, had I purchased TSLA shares back when it was underappreciated, I could have reaped huge benefits. However, the reason I do not own TSLA is simple. I have a plan and a strategy. My buying rules always give me pause before I join the herd and stampede that might be headed for a cliff.
When a Sector is Abandoned
It is far to easy to get caught up in the latest headlines. Let’s ask a few questions just to set the stage. Utility stocks are out of favor at the present time so I should sell my utility stocks, right? Interest rates will be going up so dividend growth stocks will be of less interest to investors – I should sell my dividend income stocks, right? There could be a recession, so I should sell all my equity positions like Microsoft, Target and McDonald’s and buy bonds – right? The answer to these questions depends on your point of reference. Getting caught up in the Covid-19 hysteria created opportunities for some investors who sail through choppy seas of various kinds and causes. At one point in the last twelve months, I started to question my sanity when I saw the value of some of my investments plunge in a ridiculous way. But I decided to take a longer view.
The Future of Oil
Under the current administration, the smart money is betting on “clean energy” like solar power, wind power, and vehicles propelled by batteries. All of these are viewed as “clean” energy solutions. Sadly, there are huge environmental impacts from these industries that are ignored. Furthermore, there are some huge toxic waste disposal issues that we have yet to face by chasing the new “clean energy” solutions.
Here are some other things long-term investors should consider: 1) It is highly unlikely that ocean liners, cargo ships, aircraft or other forms of human and materials transport will switch from petroleum-based engines. 2) There are a host of small-engine solutions that run on fuels, including portable generators, lawn care and snow removal tools. 3) There is a huge installed base of gasoline powered vehicles world-wide that won’t quickly be replaced by battery-powered vehicles. 4) When power plants fail, like they did recently in the south due to some amazing shifts in the weather patterns, will consumers think twice before buying a vehicle they have to plug in to fill up? 5) What will the next administration do with energy policy? 6) What will become of the plastics industries and industries that use plastics (plastic is typically made from oil or natural gas.) 7) Clean energy motors and vehicles need lubricants for moving parts. 8) The oil industry may find other creative ways to use their products.
There are no easy answers to the questions and complexities of the problems we face. I do think companies like Ford, GM, and similar manufacturers have an opportunity to gain some market share if they offer more hybrid or electric vehicle solutions. Battery technology will likely improve. But I am not ready to say goodbye to my energy-focused investments. When we travel long distances, I don’t want to be depending on “clean energy.”
My Conclusion Regarding Big Oil for 2021-2024
I have no plans to sell any of my energy investments. This is not without risk, but big oil energy is a rather small piece of my total investment puzzle, so I won’t lose any sleep if I am wrong.
Cindie and I own 800 shares of VLO as a long-term investment. Our total investment in VLO and similar energy stocks is $127,640.50 as of the end of February. We also hold shares of other refinery stocks like PSX and MPC. Although in the strictest sense GTY is not an oil stock, it is a REIT with huge exposure to this segment.
Here is an article on Seeking Alpha worth some time if you are interested in VLO.