The Hidden Boom Before Cars 'Go Green'

Gas-powered cars are on the way out... The hidden boom before cars 'go green'... History tells us to follow this trend... A 'one click' way to take advantage today...

A 'time of death' is now set for gasoline- and diesel-powered cars...

Cleaner energy is on its way in. And vehicles running on dirtier fuels will be phased out.

This isn't a new idea... Governments have been talking about a move to clean energy for decades. But now, we're seeing the auto industry set its own deadline to get the job done...

You see, in January, General Motors (GM) made a clear statement that phasing out gas- and diesel-powered cars is a priority. The company announced that it plans to stop making cars with gas and diesel engines by 2035.

That 15-year target tells us two things... First, car makers are serious about moving to cleaner energy. And second, roads with few gas-powered cars are likely just a decade or two away.

And GM isn't the only company making this effort... Ford Motor (F), Volkswagen (VWAGY), and others are forging the same path toward electricity over diesel and gasoline.

Taking it one step further, governments around the world are pushing for electric vehicles. The U.S., Australia, Europe, and more are all moving in that direction.

These countries are mapping out a "net-zero emissions" world by 2050. That means a lot more renewable energies are needed... and less of the kind of fuels that dominate the world today.

There's no getting around that renewable fuels are the future – and that the cars that run on dirtier fuels are on their way out.

But that's the long-term picture.

In today's Digest, I (Chris Igou) want to focus on the short to intermediate period...

As you'll see, just because we know the "time of death" for gas-powered cars doesn't mean this market is dead yet. That's far from the case today. And even better, I'll explain exactly how you can profit from a coming rally with just "one click" in any brokerage account...

The thing is, oil still plays an important role in global energy today...

And even if GM and other automakers make fewer gas-powered cars in the coming years, oil will likely remain important for at least a few more decades.

As investors, we must look at the facts whether we like them or not. It's the only way we can give ourselves a chance at making big gains. And those who ignore the short-term reality of the oil market today will likely miss out on a huge rally in the coming years.

Understanding where we are in the energy market is extremely important right now...

Yes, gas-powered cars will dwindle away over time. But it's not going to happen overnight. Instead, demand for gasoline and other oil products is likely to rise much higher before it eventually falls.

Remember, we're coming off a low base in 2020... Oil demand took a huge hit last year thanks to COVID-19 and the related shutdowns around the world. With many countries on lockdown, and fewer people traveling or commuting, oil demand tanked.

OPEC, which represents many of the world's major oil-producing regions, estimates that oil demand fell by 10% in 2020. That's a drop of 10 million barrels per day (bpd).

The pandemic is the main culprit for this sharp drop in demand. The world staying at home isn't good for Mr. Oil. And prices plummeted as a result.

That's why we shouldn't see that drop in demand last long... COVID-19 is not a permanent hit to the oil market. The short-term headwinds for demand are going away in the coming months and years...

The world will once again travel for work, take vacations, and stay in hotels. Ultimately, that means oil use should hit new highs again within a few years... if not sooner.

Estimates show that total oil demand will likely hit nearly 110 million bpd by 2035. That's more than a double-digit percentage jump from today's level. And it means another 15 years without oil demand falling off.

Even more, OPEC continues to limit daily oil production to help reduce supply on the market. Saudi Arabia has promised to cut 1 million bpd in both February and March.

Altogether, OPEC has been cutting production for more than six months now... greatly reducing the amount of oil in storage containers.

Crude-oil production fell from 13 million bpd to less than 11 million in late 2020.

With demand rising and oil supply shrinking, this is creating a much better scenario for higher oil prices over the short term. But that's not all...

There's another short-term factor to consider today...

The price of oil is back above pre-pandemic levels for the first time.

Oil prices bottomed in April 2020 and haven't looked back. The commodity has been on an absolute tear... It's up 42% in the past six months alone.

This kind of strong uptrend is impressive. And with the recent surge higher, oil prices recently broke out to a new 52-week high.

Now, you might think this rally can't continue higher after such a big surge. After all, we should expect a cooling-off period, right?

In short, no... at least not according to nearly three decades of data from oil prices. In fact, history shows that we can expect just the opposite after this kind of move.

The idea here is simple...

"Following the trend" is an extremely powerful investing tool. That's because trends can last longer than you imagine. And they can go much higher than many people realize.

This holds true when we look at three decades of data in the oil market. New highs often mean even higher highs are on the way. The trend is your friend, after all.

Again, oil prices just hit a new high earlier this month. Take a look...

The chart above shows the significant move higher in oil since March 2020. And you can see the recent breakout to new highs as well.

Since the end of 1990, this kind of extreme has led to strong outperformance. History shows we can expect another 10% gains in a year after today's extreme. Take a look...

Oil has climbed 4% annually for nearly three decades. That's steady growth in the world's largest energy source. But that number jumps a lot higher after a breakout like today...

Similar cases have led to a roughly 7% move in six months and a 10% move higher over the next year. That's more than double what you might expect in normal times.

So oil demand is expected to rise over the next few years. And at the same time, OPEC is tightening oil supply by limiting production in the next few months.

Those factors combined with oil's short-term breakout are all positive signs for investors. The commodity hit a new 52-week high earlier this month. And history says that will likely send oil much higher from here.

Best of all, you can take advantage of this idea with just one click of the mouse today...

Oil producers, oilfield-services companies, and similar businesses obviously benefit from a booming oil market.

So if oil prices continue to rally higher, these companies will be big winners along the way.

Now, we could dive deeper to try to figure out which company will soar the most in an oil boom. But the thing is, we don't need to...

If a multiyear bull market in oil is truly underway, buying a basket of oil-related stocks will lead to big gains. You don't need to take on any extra risk at the company level.

And fortunately, an exchange-traded fund allows you to do just that...

The Energy Select Sector SPDR Fund (XLE) is a simple way to make that bet today. It holds the exact kind of companies that profit from higher oil prices...

ExxonMobil (XOM), XLE's top holding, ranks first in U.S. oil production. And Chevron (CVX), the exchange-traded fund's No. 2 holding, is a close second. XLE also has large positions in big oil producers ConocoPhillips (COP) and EOG Resources (EOG). Schlumberger (SLB), the largest oil-services company in the world, rounds out the fund's top five holdings.

These aren't some small companies in the resource market. These are the dominant players in their fields.

So as I said, we don't need to make this opportunity more complicated than necessary...

Down the road, gas and diesel-powered cars might disappear from our roads. But that's a long way off... In the short to medium term, the picture in the oil market is positive.

Total oil demand will likely keep rising for the next five to 10 years.

With the uptrend in place right now, history shows buying oil companies is a good idea. And XLE is a simple way to play it today. Check it out.

New 52-week highs (as of 2/12/21): Analog Devices (ADI), American Homes 4 Rent (AMH), ARK Fintech Innovation Fund (ARKF), Asana (ASAN), Autohome (ATHM), Bunge (BG), Siren Nasdaq NexGen Economy Fund (BLCN), Berkshire Hathaway (BRK-B), CBRE Group (CBRE), Cognex (CGNX), Commvault Systems (CVLT), New Oriental Education & Technology (EDU), ProShares Ultra MSCI Emerging Markets Fund (EET), Eagle Materials (EXP), Fidelity Select Medical Technology and Devices Portfolio (FSMEX), GAN (GAN), Alphabet (GOOGL), ICICI Bank (IBN), Intuit (INTU), Renaissance IPO Fund (IPO), JD.com (JD), JPMorgan Chase (JPM), SPDR S&P Regional Banking Fund (KRE), MongoDB (MDB), MSA Safety (MSA), Microsoft (MSFT), MasTec (MTZ), Novo Nordisk (NVO), OptimizeRx (OPRX), Oshkosh (OSK), Palo Alto Networks (PANW), ProShares Ultra Technology Fund (ROM), Rayonier (RYN), Southern Copper (SCCO), Sea Limited (SE), Silvergate Capital (SI), Scotts Miracle-Gro (SMG), Square (SQ), ProShares Ultra S&P 500 Fund (SSO), Constellation Brands (STZ), United States Commodity Index Fund (USCI), ProShares Ultra Semiconductors Fund (USD), Valmont Industries (VMI), Vanguard S&P 500 Fund (VOO), Vanguard Short-Term Inflation-Protected Securities Index Fund (VTIP), and Zebra Technologies (ZBRA).

In today's mailbag, a question about our annual Report Card (here's Part I and Part II) and feedback on Dan Ferris' must-read Digest from last Thursday. Do you have a comment or question? As always, send it to us at feedback@stansberryresearch.com.

"I enjoyed reading the Report Cards the last two Fridays, but noticed that Ten Stock Trader was not graded. Will you be providing a grade for that subscription?" – Paid-up subscriber Tim P.

Corey McLaughlin comment: Yes. Our publisher Brett Aitken has a few more grades to hand out, including one for Ten Stock Trader... Keep an eye out for these grades in the coming days. And by the way, we're glad you are enjoying the reports.

"I read your comments in [Thursday's] Stansberry Digest. An anecdote or two that you might find interesting: I was a young broker in the retail office of EF Hutton in the small town of Santa Ana, California when Jerry Tsai's Manhattan Fund came to market in 1965. His reputation at Fidelity Trend obviously had preceded him and the fund offering was unbelievable. Novice investors as well as some experienced investors came into the office in person to DEMAND that they be allocated shares of the fund not realizing that the supply, unlike most syndicate offerings, was effectively limitless. I recall one stranger actually banging his fist on our branch manager's desk demanding shares. Of course, we assured these folks that we would be able to fill their requests.

"Somewhat later, in the '70s, I was a branch manager and we sponsored several public seminars with [market commentator] Joe Granville. They were very popular and at one of them we had about 1,200 people in the ballroom of the Century Plaza Hotel in Los Angeles that came off well. Not too long afterwards, I heard that Mr. Granville had had platforms placed slightly below the water the entire length of the reflection pool at Caesar's Palace in Las Vegas so that at his next entrance he could 'walk on water' to the front of the hotel. Then I heard that he had also gone to Nashville to have a theme song created for him. I just knew this was the top for his newsletter and, unfortunately, that turned out to be pretty much the case.

"Thanks for the effort you put in to help us all keep a balance." – Paid-up subscriber Don M.

Good investing,

Chris Igou
Jacksonville, Florida
February 16, 2021