10/16/14: Practice Common Sense And Buy These Winners

By Robert Rapier • October 16, 2014

Portfolio Action Summary

Spectra Energy (NYSE: SE) added to the Conservative Portfolio. Buy below $42
Delek Logistics (NYSE: DKL) added to the Growth Portfolio. Buy below $42

For more information on these picks, please see “Two Healthy Yields Not Tied to Crude.”

History on Your Side

If your investment horizon is 10 years or more, history would argue that the current correction shouldn’t spook you from the market. The average annual return in the energy sector for the past 10 years is 13.3%, and that includes the loss of 35.6% in 2008. But the key to these sorts of returns is not to panic.

While we would all love to buy at the bottom and sell at the top, that’s not a realistic expectation. What is easily achievable, I’ve found, is to remain consistent with my investment style. Switching strategies abruptly or often is a recipe for disaster. There is a temptation during a long bull market to become more aggressive and take bigger risks, but an occasional correction is a good reminder that investors need to be comfortable with their investment style and risk tolerance.

Earlier this week we counseled readers not to sell at panic lows, and so far that advice looks wise in light of the subsequent recovery by MLPs. Now we’re dipping our toes back into the waters with two financially strong and yet recently discounted new picks whose cash flow won’t wilt with the price of oil.

Market corrections are never fun, but the current sell-off is an opportunity for investors to reflect on their goals and investing style. Remember that in the long run the trend is your friend, but as you get closer to retirement age you will have less time to recover from a 2008-style decline. Invest in quality companies. Do not take risks above and beyond your comfort level, but remember that history is on the side of those who are patient.

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About The Author

Robert Rapier

Bio | Archive

It's hard to imagine anyone better suited to covering the energy-investment waterfront than Robert Rapier.

Robert is no armchair analyst—he has two decades of in-the-trenches experience in a wide range of fossil fuel and biofuel technologies, including refining, natural gas production, gas-to-liquids, ethanol production and butanol production.

During a six-year stretch at ConocoPhillips, Robert ran a team of engineers in Scotland working on oil and gas projects in the North Sea.

For two years, Robert was an efficiency expert in a Texas petrochemical plant. The process changes he implemented saved the facility $9 million a year. He later worked as the Engineering Director for a Dutch environmental-technology company and provided engineering support for a Chinese facility the company was constructing.

Robert was also a butanol engineer in Germany for the Celanese Corporation, where he designed a novel butanol unit that cut production costs by $5 million per year.

In all, Robert has spent more than a dozen years working on liquid fuels technologies. Along the way he's picked up five patents, including one for a breakthrough way to convert ethane into ethylene (U.S. Patent 7,074,977).

Now, in addition to guiding readers to timely investments in Utility Forecaster and Rapier's Income Accelerator, Robert travels the world evaluating startup energy companies for deep-pocketed investors. After grilling management and assessing the technology on-site, he makes a go/no-go investment decision. His wealthy private investors and hedge fund backers trust him to make the right choice for the same reason we do: his vast real-world experience in just about every facet of the energy industry. If Robert votes thumbs-up, millions of dollars flow into these cutting-edge outfits.

Robert earned his master of science in chemical engineering and a bachelor of science in chemistry and mathematics (double major) at Texas A&M University. He tells us he was "this close" to finishing his Ph.D. before he decided he was having a lot more fun making money in energy stocks.

A prolific writer, Robert's articles have appeared in Forbes, The Wall Street Journal, The Washington Post and the Christian Science Monitor -- and he has been a featured expert on 60 Minutes and The History Channel. His new book, Power Plays: Energy Options in the Age of Peak Oil (Apress, 2012), helps investors sort through doom and gloom, hype and misinformation to understand the true costs, benefits and trade-offs for each of our major energy options.

In what little spare time he has left, Robert consults for a number of energy projects, including biodiesel, ethanol, butanol and biomass gasification facilities.