War in the Middle East? Consider Small Energy Stocks By Brett Arends April 11, 2018 5:22 p.m. ET Yes, theDow Jones Industrial Averagefell more than 200 points Wednesday, oil prices rocketed to their highest levels since 2014, and the flattening yields in the Treasury market started flashing big, fat amber alerts about the economy. President Donald Trump and National Security Adviser John BoltonILLUSTRATION:MARK WILSON/GETTY IMAGES But asPresident Donald Trumpstopped threatening China and started threatening Russia, it wasn’t all bad for investors. Small energy companies—as measured by theS&P SmallCap 600 Energy Index—jumped more than 2% on the day, and a subindex of small energy equipment and services stocks rose nearly 3%. Not only did small energy companies outperform broader stocks on a down day, they also beat large energy stocks as well. (TheS&P 500 Energy Indexrose a more modest 1%.) If this mess in the Middle East gets any worse, it could be just the beginning. Small energy stocks could be a Russia/Syria/Saudi/Iran crisis play, and might even hedge your portfolio if things go really sour. (This is subject, naturally, to the usual caveat: All stock market predictions are guaranteed at time of publication to have a roughly 50% chance of being right.) The reason? The data from the past few decades say that small energy companies are highly levered to the oil price, and the oil price is highly levered to the Middle East situation—especially to security concerns in the Arabian Peninsula, tensions involving countries like Syria, and threats to and from Iran. Since at least the mid-1990s, the S&P SmallCap 600 Energy Index has risen much more than the oil price when oil has risen, and fallen much more than oil when oil has fallen. The stock index has been in a vicious bear market since oil prices began plunging in 2014. It is now 73% from its peak. (The latePeter Bennett, a successful private-client money manager in London for 50 years, used to argue that most durable asset classes were strategic buys once they had fallen that far.) Make of it what you will. ThePowerShares S&P SmallCap Energy Portfolio ETF(PSCE) tracks the index for an annual fee of 0.29%. Overall, small-company stocks beat big ones again on Wednesday. The S&P SmallCap 600 Index rose 0.2%, while the large-cap S&P 500 fell 0.55%. This is not an isolated event. So far this year, the small-cap index has risen 1.6%, while the large-cap index has fallen 1.2%. Small-cap growth stocks—as measured by the S&P 600 Growth Index—are up 3.3% since Jan. 1. Among individual stocks, the stunning 17% jump in defense contractorAeroVironment(AVAV) may be less a tribute to its unmanned high-tech equipment than to the joys of stock market contrarianism.Stifel NicolausanalystJoseph DiNardisent the stock higher after turning buyer of the stock in a new research report. Critically, before this, all six Wall Street analysts who covered the stock rated it no better than a Hold. When the market is that bearish, it only takes a small change to produce a big jump in the stock price. Sign up to Review & Preview, a new daily email from Barron’s. Every evening we’ll review the news that moved markets during the day and look ahead to what it means for your portfolio in the morning. https://www.barrons.com/articles/war-in-the-middle-east-buy-small-energy-stocks-maybe-1523481780
I would not buy oil or energy stocks. I would buy a gun(s) and lots of ammo, lots of insect and mosquito repellent body cream, canned foods, medical supplies, books on self sustaining crop/vegetation development and making shacks in the jungle. Couple of strong solar power panels won't hurt either. Jungle living on the cheap while enjoying the nature and wilderness. Care for animals for free.................http://thehungersite.greatergood.co...jsessionid=C0CD56188B435A0F9BD8E83910013C8C?1
Reminds me of NNT's Fat Tony story: Taleb argues that we are built to be fooled by theories. He says, “Theories come and go, experience stays.” Fat Tony trusts experience and, in one anecdote, becomes rich in 1991 when he bets against the experts who believe the price of oil will rise with the first Gulf War. The theory is that a war causes hoarding and bottlenecks yet, as Tony notes, the date of the war was known so far in advance that too much oil had been hoarded. Tony is beholden to no theories. He simply looked at the figures, saw there were more barrels of oil than the world needed, and bet on the price falling, which is exactly what happened.