With Vladimir Putin's invasion of Ukraine roiling global energy markets, much of the world is looking to find local sources, or at least sources closer to home.
For much of Europe, the challenge remains enormous, as a large portion of oil and natural gas to run factories, power cars and heat homes comes from Russia.
Fortunately for the U.S., there are significant reserves available locally which can serve to mute much of the volatility, at least over the longer term.
So, is the energy market on the verge of a massive cash infusion?
Real Money Columnist Peter Tchir thinks so.
“My favorite sector is "domestic" energy,” Tchir wrote recently on Real Money. “I use a broad definition of 'domestic' to include countries, or regions where the political system is truly democratic (rather than autocratic), where the moral values are similar to ours, and regions where there is geographical proximity as it makes it easier to ensure the safety of supply.”
Tchir says the concept of domestic energy has rarely been more vital than it is today. So much so, that U.S. energy production needs to take a page out of the history books.
“I’m fully in agreement with JPMorgan Chase's JPM Jamie Dimon's call for a "Marshal Plan for Energy", Tchir said.
One energy ETF that Tchir says fits the bill for energy investors is the Energy Select Sector SPDR Fund (XLE).
XLE is a large-cap ETF. Exxon Mobil (XOM) and Chevron (CVX) each represent over 20% of the portfolio. “SPDR S&P Oil & Gas Exploration & Production ETF XOP contains small companies and is highly leveraged to exploration and production,” Tchir said. “I like this as an aggressive way to trade this idea.”
Tchir also favors VanEck Vectors Oil Services ETF (OIH) – he calls it a “favorite.”
“However, OIH is very volatile so requires some handholding,” he noted. “I try to keep a core position and trade around a bit, but I think this is my favorite way to express this idea.”
While Schlumberger (SLB) and Halliburton (HAL) add up to more than 30% of the OIH portfolio, servicers will be needed regardless of who finds the energy, or where they find the energy. “It’s a sector that’s historically still cheap.”
