What has Jeff Clark, Eric Fry, and Louis Navellier looking to buy … your choice of short-term trade or long-term investment … enormous interest in TradeSmith’s new Seasonality Tool
We have a rare “triple buy” recommendation developing today.
This particular trade/investment has recently been highlighted and endorsed independently by three of our experts: Louis Navellier, Eric Fry, and Jeff Clark.
These analysts are playing the trade different ways. From “short-term trade” … to “multi-year investment” … to aggressive targeting of capital gains with options … to more conservative buy-and-holding with an income focus… there’s something for every type of investor.
We’re talking about the unfolding opportunity in fossil fuels.
Several market trends are converging to create a profit-making set-up that has grabbed a lot of attention, and could put a nice wad of cash in your pocket.
Let’s get into the details.
Beginning with a shorter-term trade opportunity, how is Jeff Clark sizing up Big Oil today?
For newer Digest readers, Jeff is a 40-year market veteran who profitably trades the markets regardless of direction – up, down, or sideways. He uses a suite of momentum indicators and moving averages to provide clues about where stocks are going next.
Right now, his indicators are telling him that a bullish move higher is coming for Big Oil.
From Jeff’s latest issue of Market Minute yesterday:
The Bullish Percent Index for the energy sector (BPENER) is on the verge of generating a buy signal. And, if this signal plays out similarly to previous buy signals, then oil stocks could play a big game of “catch up.”
To make sure we’re all on the same page, a bullish percent index (BPI) measures the percentage of stocks in a sector that are trading with bullish technical patterns. It’s designed to measure overbought and oversold conditions.
An index is overbought when it registers above 80 – meaning 80% of the stocks in the sector are trading with bullish patterns. An index is oversold when it drops below 30.
Jeff explains that buy signals occur when the BPENER turns higher from oversold conditions.
Now, that hasn’t happened yet as I write. But the BPENER is in oversold territory. Specifically, as of Jeff’s analysis, it clocks in at 28.57, which means it could generate a buy signal any day now by turning north and climbing above 30.
So, what happened the last time this indicator triggered?
Let’s go back to Jeff:
In all of 2024, we only got one buy signal from the BPENER. That was back in early August.
XLE (the Energy Select Sector Fund) gained 5% almost immediately. It then dipped to a lower low in September before launching a more significant rally that generated a 15% gain less than three months later.
XLE is currently trading at about the same price it was back in August. The sector is just about as oversold as it was back then as well.
Here’s Jeff’s bottom line:
This looks like a bullish setup to me. And, with the incoming Trump administration chanting the mantra of “Drill baby drill,” 2025 could prove to be a good year for the oil stocks.
But could “Drill baby drill” result in too much supply, weighing on oil/stock prices over a medium-term horizon?
That’s possible – which is why our macro expert Eric Fry has suggested playing fossil fuels from a different angle…
Volume.
Here’s Eric in his free e-letter, Smart Money, reminding his readers about what happened the last time U.S. production volumes spiked (due to the shale revolution):
[Pipeline, refiner, and export stocks] thrived because their revenues were tied to the volumes of hydrocarbons they handle, not the price.
The cheaper the oil and gas America pumped from the ground, the more money these “downstream” companies printed every quarter.
Pipeline firms succeeded by acting like toll roads, taking the same fee for every “car” (i.e., cubic foot of gas) regardless of the vehicle’s value. Refiners benefited from cheaper feedstocks. And exporters saw a bonanza as the world snapped up America’s low-cost fuels.
Exploration and production companies (“upstream” energy companies), on the other hand, saw the value of their reserves drop for every decline in energy prices.
We see a similar story playing out in the energy sector under a Trump 2.0 presidency.
As to specific stocks that performed well the last time we were in this environment, Eric has highlighted Cheniere Energy Inc. (LNG), CVR Energy Inc. (CVI), Valero Energy Corp. (VLO), Marathon Petroleum Corp. (MPC), and ConocoPhillips (COP). They all enjoyed double-digit gains.
To be clear, these aren’t official recommendations, but they’re good starting points for your own research.
And if you’re interested in playing this with a focus on big income, check out the pipeline plays Enterprise Products Partners (EPD), Energy Transfer LP (ET), and MPLX LP (MPLX). They’re offering dividend yields of 6.50%, 6.58%, and 7.97%, respectively.
Finally, legendary investor Louis Navellier is eyeing natural gas stocks due to their critical importance in fueling AI data centers
The AI megatrend has been fueling market gains for the last two years, and demand for AI data centers will be strong for years to come.
To illustrate, let’s begin with research from Goldman Sachs:
For years, data centers displayed a remarkably stable appetite for power, even as their workloads mounted.
Now, as the pace of efficiency gains in electricity use slows and the AI revolution gathers steam, Goldman Sachs Research estimates that data center power demand will grow 160% by 2030…
Over the last decade, US power demand growth has been roughly zero, even though the population and its economic activity have increased… But that is set to change.
Between 2022 and 2030, the demand for power will rise roughly 2.4%, Goldman Sachs Research estimates — and around 0.9 percent points of that figure will be tied to data centers.
That kind of spike in power demand hasn’t been seen in the US since the early years of this century. It will be stoked partly by electrification and industrial reshoring, but also by AI.
Data centers will use 8% of US power by 2030, compared with 3% in 2022.
So, what will power these data centers?
Well, they will need a reliable base-load power source that can provide electricity consistently, regardless of external conditions (like weather or time of day, which throws cold water on wind and solar).
Louis predicts the way our world will meet this demand is through natural gas turbines:
It’s the only current source that is widely available, relatively clean – and most important of all, cheap. So, within the context of the AI Boom, natural gas just makes common sense.
We have more than 625 trillion cubic feet of natural gas under the ground in America – ready to consume. That’s enough gas to produce 30 gigawatts… for the next 2.7 billion years… at an extremely low cost.
Louis goes on to predict that one of Trump’s first acts as president will be to sign an emergency executive order on energy.
Following that, Trump will roll back Biden’s environmental regulations… instruct his nominee to lead the Department of Energy, Chris Wright, to open the spigot on American energy production… and then open more land and sea for oil and natural gas drilling, while building more natural gas infrastructure.
This is how Louis believes we’ll provide data centers with the enormous quantities of natural gas they’ll need to transition to an AI-driven world.
But wait…
What about the risk we highlighted a moment ago which Eric echoed – the risk of too much supply flooding the market, pushing down prices?
First, due to the energy demand we just looked at, demand for natural gas should accelerate dramatically in the coming years, helping to offset the risk of supply increases.
Second, as a quant investor, Louis follows fundamental strength. So, even if a supply glut materializes, Louis will monitor the impact on profitability. As long as his chosen energy companies are generating outsized profits, resulting in higher stock prices, he’ll stick with them. If/when the numbers change, Louis will move on to the next area of market strength.
That’s the benefit of a quant approach.
Whichever way best suites you, take a good look at this fossil fuels opportunity
My favorite investment ideas are the simplest. And with fossil fuels, the case for investing is simple:
- That major cold snap happening in the U.S. right now? Bullish for natural gas
- Trump’s election and his interest in making the U.S. completely energy independent and the world’s biggest energy supplier? Bullish for fossil fuels in general
- The enormous energy needs of AI and cutting-edge tech? Bullish for natural gas and pipeline stocks
- Europe’s need for energy and its current overreliance on Russian natural gas? Bullish for U.S. natural gas
- The “clean” electric energy that fuels electric vehicles? A significant portion is from natural gas. Bullish
- Circling back to Trump, his dislike of the “Green New Scam”? Get ready to wave goodbye to various green energy subsidies – bullish for fossil fuels
- Finally, the cyclical nature of too much selling leading to great buying opportunities? That’s where certain fossil fuels stocks find themselves today – bullish
It’s rare when so many of our analysts are bullish on the same set-up simultaneously. But that’s what we have today, and it’s not hard to understand why.
If you’re looking to put money to work today, give this opportunity a good look.
Before we sign off, a quick note…
Yesterday morning, TradeSmith’s CEO Keith Kaplan held a live event that detailed his new Seasonality Tool. We expected it would garner enormous interest due to the edge it gives investors, but what we’ve seen over the last 24 hours has been off the charts.
If you’re less familiar, this Seasonality Tool is a robust software system that scans 50,000 data points daily. The goal is to pinpoint the best days to buy and sell individual stocks. Specifically, the tool searches for historical, repeatable price patterns, specific to any given stock.
The core idea is “based on historical data, can we identify specific stretches of days or weeks when a stock has risen consistently?”
The example we provided earlier this week was with Nvidia. For the past 15 years, Nvidia shot up during a 15-day time span, starting October 24, every single year. There was a 100% hit rate across that entire 15-year stretch. The Seasonality Tool is engineered to find such historical profit windows, alerting you ahead of time.
Keith debuted the tool yesterday morning, and as just noted, the interest/feedback has been phenomenal.
This makes sense to me. A moment ago, I wrote how my favorite investment ideas are the simplest. Well, what’s simpler than buying a stock at a time when years of historical market data suggests that stock is about to rise?
If you’d like to learn more, click here to catch a free replay of Keith with more details.
Have a good evening,
Jeff Remsburg
