The market is awfully volatile lately. One day, stocks are up big. The next, they plummet. And ultimately, they appear to be going nowhere while inflation and gas prices are roaring higher. Not to mention a war rages on in Europe and China struggles with a new wave of Covid-19 lockdowns.
Admittedly, it’s an ugly backdrop for stocks.
But at InvestorPlace, we like to say this isn’t so much a stock market as it is a market of stocks. The point is that even in a choppy market, certain sectors can buck the broader trend and head higher. Some may even boom while the market stalls out.
One space that could boom over the next few quarters? Energy stocks.
At least that’s how the world’s largest money manager sees things. Larry Fink, CEO of BlackRock (BLK) — an investment management firm that oversees $10 trillion in assets — believes today’s rising prices will “create an investment boom” in the energy industry.
We’re inclined to agree. While the market may be stuck in neutral, certain energy stocks could absolutely soar over the next few months.
Which stocks in particular? Let’s find out.
Near-Term Spending Boom in Fossil Fuel Energy Stocks
Larry Fink believes there’ll be two energy spending booms soon, both sparked by today’s elevated oil and gas prices. And we agree. The first will happen over the next few quarters. And the second boom will play out over the next few years.
The first incoming boom is a short-term spending surge on fossil fuel production, which should benefit oil and gas stocks.
Historically speaking, whenever oil and gas prices spike, you see those exploration companies start to rev up operations.
That’s because oil exploration is inherently a low-margin, high-expense business. Consequently, many exploration projects are only profitable if oil costs are above a certain level. So, when those prices rise, you see oil and gas exploration companies bring more projects online. That’s when those projects are actually profitable.
The current price spike should play out no differently.
In fact, it should happen with even greater magnitude. After all, the current rise in oil prices is the fastest we’ve seen in over 15 years. Consequently, the rise in exploration and production should also rise at its fastest pace in 15 years.
If so, then stocks tied to this increased operation will head higher in the near-term.
Companies will produce much more oil and gas at much higher prices, meaning more revenues, bigger margins and more profits. And all that should lead to higher stock prices.
For oil and gas investors, that’s an exciting prospect. But it can’t touch the profits to be made from the second wave of the spending boom in energy stocks.
Long-Term Spending Boom in Climate Tech
The investment boom in oil and gas won’t last for very long.
That’s because as exploration and production operations ramp up, supply will increase. As supply increases, prices will drop. And as prices drop, many projects will become unprofitable. They’ll have to come offline. And suddenly, a surge in revenues and profits in the oil and gas industry will turn into an enormous drop. Those stocks will collapse.
That’s just the pattern here, folks. It’s tried and true. This time won’t be any different.
So, for investors looking for a long-term way to play an energy investment boom, consider its second wave. We’ll see accelerated investment into the clean energy transition.
In Fink’s own words:
“… recent events will accelerate the shift toward greener sources of energy in many parts of the world over the long-term. And we will see tremendous changes in the energy transition… This presents a significant long-term opportunity for investments in infrastructure… renewable, clean tech on behalf of our clients.”
In essence, the Russia-Ukraine war has underscored the fragility and vulnerability of a globalized energy ecosystem built on non-renewable energy. The most sustainable economic solution to reinvent the global energy ecosystem is to replace fossil fuels with renewable sources. But the infrastructure to support a clean-energy ecosystem is not in place yet. So over the next several years, we’ll see a massive spending boom to build that foundation.
Fink is 100% correct.
Russia’s invasion of Ukraine has accelerated the world’s transition toward clean energy. As a result, companies and countries will invest billions to build out solar farms, EV charging infrastructure, and more.
The companies that make those things will obviously benefit from that spending boom. Their revenues and profits will soar. And unlike the near-term surge in oil and gas profits, the rise of these climate tech companies will remain.
Consequently, climate tech stocks are fantastic investment opportunities today. They’ll soar over the next 12 months, five years, even 10-plus years.
They are long-term compounders in the early innings of their growth narratives. And they’ll make patient investors many times their money over the long run.
The Final Word on Energy Stocks
The world’s largest money manager believes the Russia-Ukraine war will spark an enormous investment boom in the clean-energy sector.
And he’s 100% right.
That’s why, in ourinvestment researchadvisory Innovation Investor, we’re backing up the truck on climate tech stocks right now. We’re talking solar, energy storage, hydrogen, battery, EV — and much more. By investing in those today, we expect to make many times our money over the next few years alone.
In particular, there is one tiny $3 stock that we have our eyes set on right now. This company is working on next-gen battery technology that will likely be at the epicenter of the clean-energy investment boom.
The potential upside in this stock is enormous. It’s so big, in fact, that I can’t write its name in this post.
But I did recently give a presentation on this stock, where I told a group of 60 all about it.
I’ll pull back the curtains on that event to give you the same killer opportunity. Learn all about the stock at the center of what Larry Fink says will be a massive investment boom.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
The post World’s Largest Money Manager Says Energy Stocks Are Positioned for an ‘Investment Boom’ appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.