In this issue:

It’s tough to slog through a slump as deep and wide as the current one in energy. The parade of ever lower prices tempts investors time after time to chase perceived bargains that soon prove anything but, because it can take a very long time for equity prices to catch up to the grim new realities.

By the time genuine bargains crop up, the pool of cash available to seize them has long evaporated.

Our job is to spare you that outcome. And that has meant mostly subtracting from our portfolios rather than adding to them over the past 18 months, as we wait for the fat pitch that hasn’t come yet.

Our results for 2015 don’t look so hot, but they beat the relevant benchmarks largely because we were quick to discard in the first half of the year some of the risky stocks that would go down huge during the second-half collapse. (It also helped to have correctly anticipated that refiners and tankers would benefit from lower crude prices.)

Our call that midstream names would also fare well proved very wrong, but valuations are now at levels that provide limited downside risk and lots of rebound potential. That’s why we’ve confined our current Buy recommendations to a handful of the most attractive pipeline plays, along with a couple of natural gas producers.

As you can see from our screen of the biggest energy winners over the last three months, investors generally want as little to do as possible with oil and natural gas producers and processors at the moment. That will change in due time. But for now it makes sense to fight the inevitable frustration and remain very selective in deploying capital.

Portfolio Update

• Continental Resources (NYSE: CLR) dropped from Growth Portfolio

• ETRACS 2xMonthly MLP Index ETN (NYSE: MLPL) dropped from Aggressive Portfolio

• National Oilwell Varco (NYSE: NOV) moved from Conservative to Growth Portfolio

Commodity Update

Oil prices have made a recovery back into the $30s since our previous issue. West Texas Intermediate (WTI) gained $2.89/bbl to $31.55/bbl. Brent crude had much stronger gains, rising $5.88/bbl to $34.12/bbl. Natural gas was unchanged from our previous issue at $2.15/MMBtu. It would be premature to assume that this is the beginning of any recovery in the price of crude oil, given the still very high global crude oil inventories.  

In Other News

• Chevron (NYSE: CVX) reported its first quarterly loss since 2002  

• Oil prices surged as Russia’s energy minister said February discussions with OPEC members will address topic of output cuts

• The number of rigs drilling for oil in the U.S. has dropped to 498, the lowest level since 2010

• The U.S. Energy Information Administration’s latest Short-Term Energy Outlook forecasts rising natural gas prices in 2016 and 2017, primarily on industrial demand

• The plunge in fuel prices helped make 2015 the most profitable year for U.S. airlines since deregulation in 1978.