The Donald Trump presidency is finally a reality. This begs the question, which stocks will now outperform during the Trump era? One possibility is the energy sector, and oil stocks in particular.
How a Trump Presidency Could Affect the Oil Industry
It's no secret that Trump is a big supporter of the oil industry. During his presidential campaign he promised to "unleash America's $50 trillion in untapped shale, oil, and natural gas reserves, plus hundreds of years in clean coal reserves." Trump appointed Rick Perry, a strong promoter of domestic oil production, as Secretary of Energy. He also appointed former Exxon Mobil (NYSE:XOM) executive Rex Tillerson as Secretary of State. Trump promoted oil production in his first few days in office by signing an executive order to restart the Keystone and Dakota Access pipelines. Clearly, traditional fossil fuels will be a primary focus of President Trump's energy policy.
The Current State of the Oil Industry
The oil industry was in a rebound even before Trump took office. The chart of the light crude oil index (Figure 1) show that oil prices bottomed out in February of 2016. Prior to that, the price of oil had been in freefall, taking most energy stocks with it. But oil prices are now consolidating in the $50-$60 dollar range. Concurrently, oil stocks started to bottom and recover from the headwinds caused by plummeting oil prices.
Figure 1: Chart of the light sweet crude oil index. Chart provided by Freestockcharts.com.
That recovery is likely to accelerate with President Trump in charge. Trump's energy policy will favor domestic energy production from traditional sources. This includes oil and natural gas. The economic outlook is improving for the oil industry. The task now is to find oil stocks that benefit.
Finding Oil Stocks to Invest In
First we'll need to find oil stocks to invest in. Nasdaq.com has a convenient list of stocks from the Energy Sector. This list contains several companies involved in oil discovery, production, equipment, and/or refining. We can expect many of these companies to benefit from President Trump's energy policy. But the list has over 300 stocks, and needs to be pared down. A good way to start is by looking at stock charts for bottoming stocks. Here are a few examples.
BP Prudhoe Bay Royalty Trust (NYSE:BPT) is close to completing a long-term bottom that started early last year. It has a lot of room to move up.
Figure 2: Chart of BPT. Chart provided by Freestockcharts.com.
CARBO Ceramics (NYSE:CRR) moved up quickly out of its V bottom last year, and is showing some momentum. If it can sustain above the $15 level it has a lot of room to move up.
Figure 3: Chart of CRR. Chart provided by Freestockcharts.com.
Emerge Energy Services (NYSE:EMES) trended sideways for a long time after coming out of its bottom. Stagnating oil prices or lackluster company fundamentals probably kept it from moving strongly. However, it's starting to move up with some strength.
Figure 4: Chart of EMES. Chart provided by Freestockcharts.com.
MPLX (NYSE:MPLX) also languished in a sideways pattern for almost a year after coming out of its V bottom. But now it's starting to move out of that sideways pattern, and has a lot of profit potential.
Figure 5: Chart of MPLX. Chart provided by Freestockcharts.com.
SemGroup Corp. (NYSE:SEMG) has been moving up nicely since it bottomed early last year. It still has plenty of room to move up, though.
Figure 6: Chart of SEMG. Chart provided by Freestockcharts.com.
These are all interesting charts, but charts are just a starting point. Fundamentals must be carefully checked before entering into a long term hold of any stock. This includes past revenues and earnings, expected future revenues from earnings releases, and institutional holdings. With proper research and preparation, oil stocks can be a profitable addition to any investor's portfolio.
The future is looking brighter for the oil industry, now that Donald Trump and the Republicans control the White House and Congress. So use stock charts and the resources at Nasdaq.com and similar websites to find stocks that will benefit from their policies.
Disclaimer: None of the stocks mentioned in this article are recommended by the author. They are listed here for discussion and educational purposes only.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.