Going Deep in an Energy Subsector

The market is about to complete one of its best first quarters in some time. But to say this has been an unusual rally would be an understatement. The rally was led by sectors like health care and consumer staples, among others that are usually considered defensive or "risk off" plays. Traditional "risk on" sectors, like materials and technology, underperformed during the quarter. Energy and industrials fell somewhere in between. Given the uncertainty around worldwide growth, especially Europe, the outperformance of consistent, albeit slow-growing, sectors like consumer staples makes sense. However, valuations for defensive sectors look like they are approaching overbought territory, if they aren't already there.

To be successful for the rest of the year, investors must find and buy sectors and stocks that provide more robust growth opportunities. One sector I continue to like is energy. The U.S. is still in the early innings of a huge increase in domestic oil & gas production. Oil prices remain historically high and natural gas prices have doubled from where they were approximately a year ago. In addition, technology has allowed energy concerns to get production out of areas previously considered uneconomical (e.g., shale) as well as drill deeper and farther from shore than ever before....313 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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