The #1 Sector to Beat the Market

by Andrew Zatlin December 02, 2022 1:00 pm ET

Not every sector is struggling right now.

In fact, one has performed great this year…

And now it’s poised for even more growth ahead.

Can you guess which sector I’m referring to? Read on to find out…

For a transcript of this video, see below. This transcript has been lightly edited for length and clarity.

The #1 Sector to Beat the Market

Let’s play another round of my favorite game: “Guess that Sector”!

To start, let me show you the stock performance of two companies from this sector.

Let’s start with Aecom (NYSE: ACM):

This stock is up twenty percent for the year.

And here’s Fluor Corp (NYSE: FLR):

Its stock is up fifty percent for the year.

And keep in mind, these gains are happening while the overall market is tanking!

Sweet sassy mollassey… what’s going on here?

Which sector has such impressive growth?

This Sector Is a Coiled Spring, Ready to Pop

The answer is the Energy Sector…

And more specifically, infrastructure for the Oil & Gas sector.

This area is a tightly-coiled spring, ready to be released so it can deliver solid returns not just for the next few months, but for the next few years.

Why am I so bullish about this sector? Let’s take a look…

Revisiting Oil Prices

Back in February, Russia invaded Ukraine. This led to panic in the market, particularly when Russia’s oil was embargoed.

As you can see below, this sent oil prices surging. They’d been hovering between eighty and ninety dollars a barrel. But in a few months, oil hit $120:

But as suddenly as the price increased, it soon crashed.

This was the result of a hugely important decision…

Tapping into the SPR

The decision involved the heavy hand of government intervention. Let me explain:

The chart below shows a thirty-year history of America’s Strategic Petroleum Reserve (SPR, for short):

Basically, the government holds tons of oil in reserve. It does this so it can meet emergencies, and to keep prices moderated.

As you can see, over the past few months, the SPR volume has plummeted. It’s down almost seventy percent. This drop happened at the same time as oil prices fell.

And make no mistake, it wasn’t a coincidence…

The Government Gets Involved

You see, when oil prices soared, the U.S. government stepped in and flooded the markets with oil. That sent oil prices, and the amount of oil in the SPR, falling.

At first blush, this seemed like a good strategy. After all, that’s why we have a reserve of oil.

But here’s the catch:

There’s a limit to the amount of oil that can be pumped into the market. And that limit has been reached. Let me show you:

This is a current snapshot of the SPR. There’s not much more oil that can be released!

As a result, look what’s happened to oil prices:

As you can see by the arrow, prices are starting to go back up. Basically, the market’s responding to a more normalized level of supply and demand.

That’s great news for those in the oil industry, especially in the short-term.

But remember, I’m looking at this sector as a great long-term investment opportunity, too.

How come?

Here’s Why Russia Matters

Let’s revisit Russia. Keep in mind, it can’t drill for oil right now. Investment in oil drilling has dropped from fifty-billion dollars to thirty-two billion dollars. That’s huge.

Major projects are being pushed out because there’s no money and no technology. New initiatives are waning, too. Investments to find new oil reserves have fallen forty percent.

The thing is, drilling for oil isn’t an overnight process. It’s a multi-year commitment. That means that for at least the next five years, Russia’s oil supplies will shrink. And less supply in the market will mean higher prices.

In other words, we’re entering a boom time for oil drillers and infrastructure companies.

As just one example, look at the number of oil rigs added into operation this year by Baker Hughes (Nasdaq: BKR):