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Elliott Gue knows energy. Since earning his bachelor’s and master’s degrees from the University of London, Elliott has dedicated himself to learning the ins and outs of this dynamic sector, scouring trade magazines, attending industry conferences, touring facilities and meeting with management teams.

Elliott Gue’s knowledge of the energy sector and prescient investment calls prompted the official program of the 2008 G-8 Summit in Tokyo to call him “the world’s leading energy strategist.”

He has also appeared on CNBC and Bloomberg TV and has been quoted in a number of major publications, including Barron’s, Forbes and the Washington Post. Elliott Gue’s expertise and track record of success have also made him a sought-after speaker at MoneyShows and events hosted by the Association of Individual Investors.

Elliott Gue also contributed chapters on developments in global energy markets to two books published by the FT Press, The Silk Road to Riches: How You Can Profit by Investing in Asia’s Newfound Prosperity and Rise of the State: Profitable Investing and Geopolitics in the 21st Century.

Prior to founding the Capitalist Times, Elliott Gue shared his expertise and stock-picking abilities with individual investors in two highly regarded research publications, MLP Profits and The Energy Strategist, as well as long-running financial advisory Personal Finance.

In October 2012, Elliott Gue launched the Energy & Income Advisor, a semimonthly online newsletter that’s dedicated to uncovering the most profitable opportunities in the energy sector, from growth stocks to high-yielding utilities, royalty trusts and master limited partnerships.

The masthead may have changed, but subscribers can expect Elliott Gue to deliver the same high-quality analysis and rational assessment of investment opportunities in the energy patch.


Tactical Maneuvers

With few exceptions, energy stocks have been taken to the woodshed this year.

Fortunately, some proactive hedging has helped to offset some of the downside in our Model Portfolios. In January 2014, we began to take profits in some of our riskiest holdings and add exposure to airlines and other industries that tend to benefit from lower oil prices.

In this issue, we reassess our picks in the airline, cruise, convenience store and petrochemical industries in light of the increasing risk of a bear-market correction in 2016.


US Natural Gas: Outlook and Investment Guide

We’ve remained bearish on US natural-gas prices for the past several years, asserting that any short-term rallies induced by a cold winter would fail when prices approach $4 to $5 per million British thermal units.

The floor for the commodity sits around $2 per million British thermal units, though elevated inventories and production levels suggest Henry Hub prices could fall below this threshold this winter.

Nothing on the horizon suggests that US natural-gas prices will escape this trading range, while the near-term risks skew decidedly to the downside.

We expect front-month prices at the Henry Hub, the official delivery point for natural-gas futures that trade on the New York Mercantile Exchange, to struggle to top $3 per million British thermal units in 2016. The thermal fuel could also tumble to $1 per million British thermal units or less if a warm winter swells the volume of natural gas in storage.

In this issue, we delve into a handful of popular gas-focused producers, but opt to stand aside on even our favorite names for now. However, a buying opportunity could emerge in coming months if this winter ends up being warmer than usual.

We’re more bullish on midstream names that stand to benefit from growing demand for US natural gas at home and in Mexico.

Gas-Heavy Producers: Still on the Sidelines

With elevated inventory levels, robust production and the potential for an unusually warm winter, even the best-positioned players in the Marcellus Shale could suffer further downside. Here’s our take on a handful of popular gas-focused exploration and production companies, with the write-ups appearing in order of preference. We may consider instituting a dream buy price on one or two of these names in coming months; however, for now, we prefer to remain on the sideline.

US Natural-Gas Prices: Lower for Longer, with an Elevated Risk of Near-Term Downside

The US gas market has remained mired in a lower-for-longer price scenario for the past five years, with occasional rallies catalyzed by favorable weather conditions–not improving fundamentals. Nothing on the horizon suggests that US natural-gas prices will escape this trading range, while the near-term risks skew decidedly to the downside.

Those Who Misinterpret the Past Are Doomed Not to Profit

Market pundits and talking heads who use the 2008-09 collapse in energy prices and related stocks as an analogue for the current downturn fail to distinguish between a demand-driven correction and a longer-lived one where the imbalance occurs on the supply side.

Whereas the financial crisis and Great Recession sapped demand, the severe downdraft in oil prices that began in the second half of 2015 reflects an upsurge in non-OPEC production, driven primarily by the North American onshore market.

Investors who followed our lead and bought the dip in energy stocks in late 2008 and early 2009 booked huge gains, with the S&P 500 Energy Index soaring almost 40 percent from the end of 2008 to March 2010.

However, those who fell prey to recency bias—the tendency for humans to use patterns from the proximate past to predict the future—and bought energy stocks in anticipation of a V-shaped recovery in oil prices haven’t fared well this time around.

Based on our fundamental analysis of the oil market and lessons from the 1980s and 1990s, we repeatedly warned readers to resist the urge to buy energy equities that looked cheap on traditional valuation metrics. We underscored this risk during the energy sector’s spring relief rally, which far too many investors misinterpreted as an all-clear signal.

After an almost 18-month bear market in energy prices and related stocks, we appear to be on the verge of an epic buying opportunity for a select group of upstream names that have the balance sheet and asset base to win market share and grow in an environment where prices remain lower for longer.

Our strategy, which we outlined in the Sept. 26 issue of Energy & Income Advisor, is based on lessons from the mid-1980s and early 1990s. Elevated US oil inventories, coupled with reduced demand during refinery turnarounds this fall and in early 2016, increase the likelihood of another selloff in crude-oil prices even though domestic output has started to roll over.

To take advantage of this coming buying opportunity, we’ve narrowed the universe to our top picks and setting dream buy prices for these stocks. Note that our strategy doesn’t aim to pick a bottom for these equities; rather, our goal is to identify valuations that represent good entry points.


  • Live Chat with

    Elliott and Roger on Nov. 30, 2015

  • Portfolios & Ratings

    • Model Portfolios

      Balanced portfolios of energy stocks for aggressive and conservative investors.

    • Coverage Universe

      Our take on more than 50 energy-related equities, from upstream to downstream and everything in between.

    • MLP Ratings

      Our assessment of every energy-related master limited partnership.

    • International Coverage Universe

      Roger Conrad’s coverage of more than 70 dividend-paying energy names.


    • Roger S. Conrad

      Founder and Chief Analyst: Capitalist Times and Energy & Income Advisor

    • Elliott H. Gue

      Founder and Chief Analyst: Capitalist Times and Energy & Income Advisor

    • Peter Staas

      Managing Editor: Capitalist Times and Energy & Income Advisor