Continue Betting on This Strong Commodity Trend

Offshore oil

The past few years has seen investors shift interest first towards alternative and green energy plays, and then away from them. That’s due to a view that the technology could be scaled up quickly. But that may not be the reality.

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  • That’s led to a strong performance in the energy sector, and one that’s likely to continue. It’s being aided by companies announcing that they’re scaling back their alternative energy investments.

    The latest company to scale back its alternative energy plans is BP (BP). The company sees the potential for a new energy supercycle, which could benefit oil and natural gas for years.

    While a bigger player in the industry, BP has been a relative underperformer in the market, with a 6 percent gain over the past year. Yet revenues are up 52 percent over the past year, and the company expects that trend to continue.

    Action to take: Shares trade at 5 times forward earnings, and the company just bumped its dividend to a 3.8 percent yield. That makes it attractive, especially as it hasn’t run as much higher as other major oil players.

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  • For traders, shares are in a strong uptrend. The June $40 calls, last going for about $1.30, offer mid-to-high double-digit gains in the months ahead.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.