I just got off the phone with my friend over in Switzerland.
He ran one of the largest oil trading books in the world last year. He sold everything in March when oil was trading north of $120 — and he pulled all of his money out of Russia.
Smart man.
But here’s the thing… West Texas Intermediate (WTI) — the U.S. benchmark — hit $75 Monday. Oil is falling as people worry about the state of the U.S. economy while China continues to amplify its lockdowns.
I don’t know how to say this… without massive levels of enthusiasm…
But I’m buying with both hands!
I’m not worrying about the next 12 months. I’m buying energy stocks. Holding them… Loving them…
If you’re interested in energy stocks, too, here’s one to consider…
It’s the Sale of the Century
This is a time to buy. We’ve waited all year for this opportunity. We’ve cursed, screamed and barked about energy policy. We’ve complained about a recession…
And here is the energy sector — giving us ONE last chance to go long.
So where to start?
One of my favorites is Devon Energy Corp. (NYSE: DVN), an Oklahoma-based oil producer that has a dividend of roughly 8%. Its dividend is covered — meaning the company will pay it. There’s no need to worry about production cuts, or about the company shedding assets.
The stock is pulling back because funds are taking profits while Europe is awash in oil. This situation won’t last forever… I know it’s hard to look out six or 12 months — or even 12 years — but energy won’t stop being expensive.
Even in the face of a global recession — WTI is still $75.
And really bad energy policy out of this administration has forced Devon and other members of the oil elite to manage their balance sheets in an ultra-protective way.
Devon is paying investors nearly 8% a year to help fund the company. If bad policy continues to hammer this sector, expect the dividend to increase… and expect oil to shoot higher.
How to Trade This Company
Shares were trading around $67 on Monday.
But look at this opportunity… I could sell the $50 put for Jan. 20, 2023, and buy the $47.50 put for protection. This trade requires $277 in margin to make $23. But the return here is 8.3%.
That’s higher than the dividend right now.
And what’s incredible about this trade is that if the stock magically pulls back to $49.77 (the breakeven price for this particular trade), I would want to own this stock. I would back up the truck.
I’ll take a dividend that will be north of 10% on an oil company poised to mint money over the next decade.
You don’t get many opportunities like this as an investor or trader.
It’s the no-brainer trade of December.
Have a great week,
Garrett
