Originally published April 11 2005
Power investors put money on alternative energy as oil prices sour
by Mike Adams, the Health Ranger, NaturalNews Editor
Big-time energy investors have been moving their money into new areas now that oil prices are rising but individual investors have not changed course all that much. However, as the price of crude oil continues to climb, individuals are beginning to see new market directions and they are moving their money around accordingly. There have been some people moving their money into alternative energy companies now people are looking for new power solutions. However, many analysts expect that demand for oil probably will not drop off until gas hits $3 a gallon and people start seeing the merit of walking to the store rather than driving.
As a stock market analyst, Randall Grace sees money to be made in the recent higher oil prices.
Investment professionals such as Grace have adjusted portfolio strategies to capture profits from a long-term rise in oil futures.
Higher oil prices may prompt people to consider buying hybrid vehicles, but it doesn't automatically make them think of selling broad market funds in favor of funds in industries that are promising at the moment.
But the potential effect of high energy prices on everything from interest rates and economic growth may make this a good time to re-evaluate investment strategies.
With the price of crude oil up more than 29 percent so far this year, the Standard & Poor's 500 Index tends to go down, which is one explanation for the index's 2.5 percent decline this year.
"We're at about 12 to 15 percent energy, and the S&P is about 8 or 8.5 percent energy, so we're overweight in our portfolio as compared to the broader market," said Grace of Chilton Capital Management in Houston.
But the asset management company is managing that extra dose of energy stocks by limiting its exposure to oil and gas exploration companies that would suffer most if oil prices suddenly dropped.
Investment professionals tend to react faster than individual investors, especially those who use patience as a mantra to guide their portfolio management.
"Companies have been using productivity gains to absorb the higher prices and not pass that expense on to customers," said Bill Gilmer, vice president of the Houston office of the Federal Reserve Bank of Dallas.
"The easy money has been made on the gas stocks and trading crude back and forth," Berger says.
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