These stocks are a smart long-term bet on energy

Today’s issue in preview:

• These stocks are a smart long-term bet on energy

• One of the world’s greatest investors bets big on oil and gas

• AI has changed the laws of financial physics. Your portfolio may be at risk.

• These stocks are a smart long-term bet on energy

These stocks are a smart long-term bet on energy

Credit: photosbyjim

We were bullish and long oil before it was cool. Our trade is a huge winner.

But what comes next? How do we trade it from here?

On September 29, I highlighted the emerging leadership of oil and gas stocks and stated it was time to be long this sector.

The bull case I made for oil stocks back then was simple. If the global economy is growing, oil demand will remain solid. However, importantly, U.S. shale oil production growth appears to be peaking. This would remove a critical and reliable source of production growth that has been in place for over a decade. Plus, oil is very cheap relative to gold and other assets, indicating good value in oil.

Soon after our note, oil stocks embarked on a giant rally, which was eventually boosted by the Iran war. This rally has driven the SPDR S&P Oil & Gas Equipment & Services ETF (XES) up 75%. It has generated a 60% gain in Suncor Energy (SU), one of our top ideas. The “Big Oil” ETF – the Energy Select Sector SPDR Fund (XLE) is up 28%. These are terrific returns in less than nine months.

In our May 15 issue, I detailed how oil is unlikely to trade below $80 per barrel for a long time, thanks to damaged infrastructure and the coming wave of oil buying to restock supplies depleted over the past two months. Both are bullish fundamental drivers for oil stocks. I concluded that update with, “Still bullish.”

A continued uptrend in the oil and gas industry would be particularly bullish for oilfield services stocks.

Oilfield services firms do not prospect for oil… nor are they “Big Oil” firms such as ExxonMobil (XOM) and Chevron (CVX). Instead, oilfield services firms provide a vast array of critical equipment and services to oil exploration and production firms. The equipment side includes drilling rigs, high-strength pipe, valves, and drilling tools. Services includes operating offshore drilling ships, oil reservoir monitoring, and fracking oil wells.

In our May 5 issue, I detailed how one of the long-term consequences of the Iran War will be a strong imperative for big businesses and governments to diversify their sources of critical resources, such as oil and natural gas. No politician, CEO, or major shareholder wants their business to be in the vulnerable position of being heavily reliant on Middle Eastern resource flows. No citizen wants their country to be in that position.

This means building and buying as many forms of “not Middle Eastern” resource supply chains as economically feasible… which means substantial spending on drilling new oil wells and expanding production at existing oil fields around the world.

Big oilfield services firms that stand to benefit from this trend include SLB (SLB) and Halliburton (HAL). Both are large, diversified firms that offer a wide range of equipment and services. Baker Hughes (BKR) is another large, high-quality oilfield services giant. It’s a major player in drilling equipment and services. It is also involved in data center power generation and natural gas shipping services.

If investing via “one click, and you’re done” ETFs is more to your liking, the SPDR S&P Oil & Gas Equipment & Services ETF (XES) and the VanEck Oil Services ETF (OIH) are both good options. Both hold diversified baskets of top oilfield services stocks. OIH is heavily weighted towards SLB, HAL and BKR.

Oil and gas stocks have enjoyed strong uptrends since our September 2025 call. But thanks to the long-term drivers detailed above, they have a lot more room to run. This trend is likely to persist.

One of the world’s greatest investors bets big on oil and gas

Credit: Chat GPT

I’m not the only person betting on a wave of spending to secure oil and gas supplies.

Stan “The Man” Druckenmiller is also betting big on this trend.

Druckenmiller is one of the world’s greatest investors. He’s on my “Mt. Rushmore” of investors and traders. It’s been reported that “Druck” achieved 30% annual returns for 30 years with no down year. That earns him his own wing in the Wall Street Hall of Fame.

Druckenmiller is a world-class practitioner of “global macro” trading. This means he looks for big impending shifts in industries, technologies, currencies, interest rates, and commodities… and then bets on those shifts taking place.

Big investors like Druckenmiller must report their public-market positions to government regulators via “13F filings.” Those filings are made every quarter and are public. 13F filings essentially allow you to look over the shoulder of investors like Druckenmiller, which is often useful for spotting trends and good stock ideas.

Last week, Druckenmiller revealed that he recently purchased over 2.5 million shares of Argentine oil and gas producer YPF (YPF). The purchases increased a YPF position Stan held the previous quarter. The stock is now one of his largest positions.

YPF is the largest oil and gas company in Argentina. It is the dominant operator in Argentina’s enormous Vaca Muerta (dead cow) shale basin. The Vaca Muerta is one of the world’s most promising oil fields. Its potential for big discoveries and increased production is enormous… and its “not in the Middle East” location is a major positive.

However, since Argentina has spent most of the past 50 years as an economic basket case, many investors avoid investing there.

Making a bet on Argentina getting “less bad” looks like a good idea, however. In 2023, the country elected Javier Milei as president – an advocate of sensible, small government. He’s scored a string of successes that could make Argentina a good place to do business… and to discover large new oil reserves. This makes the Vaca Muerta one of the world’s most-watched oil fields among industry experts.

Stan doesn’t run his investment ideas by me, so I can’t know exactly what he is thinking. But I bet he’d mention the world’s burning desire to develop non-Middle Eastern oil and gas supplies as a big factor in his decision to load up on YPF.

YPF isn’t the only vehicle an investor can use to bet on a potentially huge win via Argentina’s oil and gas development. Another operator in the Vaca Muerta is Vista Energy (VIST), with a market cap of around $7 billion. Vista is another company that could enjoy a large increase in market value if it has exploration success and an improving business climate.

The world’s most powerful governments and businesses are very keen on discovering, developing, and securing safe supplies of critical resources like oil and gas. Argentina has them. One of the world’s best investors is betting that this situation will deliver big returns for the likes of YPF and VIST.

AI has changed the laws of financial physics. Your portfolio may be at risk.

Credit: 2d illustrations and photos

The prospect of large returns isn’t the only allure of owning oil and gas firms.

Another is diversification. In a world where it can be difficult to find trends that aren’t correlated with AI, diversification is valuable.

In late 2022 – before ChatGPT was released to the public – I told friends and colleagues that AI was about to explode into public awareness.

Shortly after, AI did just that, marking the beginning of one of the biggest investment themes of our lives… one that has produced dozens of 100%+ stock winners. During this time, I’ve urged investors to ignore AI skeptics and stay long the historic AI infrastructure boom.

In other words, I was bullish on AI before it was cool… and I’ve stayed that way for over three years.

As bullish as I am on AI, I believe most people shouldn’t be “all in” on this trend. Most people should treat their investment portfolio like a sensible diet. It should be balanced and diversified. You want to own some assets that can “zig” when others “zag.” And you don’t want your whole 401(k) to depend on the outcome of one bet.

However, the AI superboom has changed the rules of diversification. Big tech’s enormous AI infrastructure boom is not only dominating industry moves and investor sentiment in computer hardware, it is also greatly influencing the copper mining market, Engineering & Construction stocks, the utility sector, the software market, and the cybersecurity market. It is influencing a wide range of the economy beyond computer hardware.

“Okay, Hunt… I’ll go global and international for diversification then. I’ll own international stocks and emerging markets.”

Not so fast. Although many people like to think that owning international stocks is a portfolio diversifier, the chart below shows that right now, it most certainly isn’t.

The chart below is a 2-year “performance chart” that plots the performance of the Technology Select Sector SPDR Fund (XLK, blue line) and the iShares MSCI Emerging Markets ETF (EEM, green line).

XLK is one of the world’s largest “pure play” tech stock funds. It’s a bunch of stocks that comprise one big AI trade.

EEM is the world’s largest and most popular emerging market ETF. It aims to give investors exposure to markets in Taiwan, China, South Korea, India, and Brazil. It’s a bunch of stocks that comprise… one big AI trade?

Yes, XLK and EEM are highly correlated… so much that they are essentially the same trade. AI has become such a world-shaping dominant force that EEM – the world’s most popular emerging market ETF – holds big positions in enough AI-exposed tech firms that it now dances to the same tune as XLK. The two funds have moved up and down in lockstep, generating similar returns over the past two years.

We cannot say the same for oil and gas stocks. This sector has traditionally been a good portfolio diversifier. Great wealth managers and financial advisors have prized this quality for decades. And at least for now, that diversification factor still holds.

Market Notes

• Tech supergiant Google (GOOG) reached a new all-time high today.

• Trucking firms Saia (SAIA) and Knight-Swift (KNX) reached new one-year highs today. These are bullish economic signals.

• Our March 27th recommendation to own cybersecurity stocks is doing well. CrowdStrike (CRWD), Fortinet (FTNT), and F5 (FFIV) just hit new yearly highs. 

• Our October 24th recommendation to front-run the SpaceX IPO in the space theme is paying off well. Rocket Lab (RKLB), Planet Labs (PL) and Intuitive Machines (LUNR) just hit new all-time highs. PL is up 993% in the last year alone. 

• Clothing and shoe giant Nike (NKE) reached a new multi-year low today. A host of cooler, newer, and smaller brands are eating into its market share.

• Our April 17th recommendation to own satellite firm Iridium Communications (IRDM) reached a new one-year high today.

Our Top Themes to Buy Now

☢️ Uranium: Four stocks and two ETFs for the bull market in nuclear power

🪙 Silver: AI, Batteries, and Silver: The Market’s Next Big Winners

🦾 Robotics: Six ways to invest in the biggest product of all time

Regards,

Brian Hunt
Editor, Money & Megatrends

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