Some of the world’s top investors are buying one of the most hated sectors in the market… and that’s a great sign that it’s time to buy today.
Regular readers know the concept of “bad to less bad trading.” My colleague Steve Sjuggerud coined the phrase, which refers to buying assets after the market has bottomed, then making huge returns as conditions become “less bad.”
[ad#Google Adsense 336×280-IA]Today, the energy market has gotten clobbered.
West Texas Intermediate crude oil – the U.S. benchmark – is down 70% from its June 2014 highs… And natural gas prices are down 60%-plus over the past two years.
That’s why some investment gurus are seeking “less bad” opportunities in the market today…
Back in September 2010, with the Federal Reserve’s first round of quantitative easing (QE) coming to an end, billionaire hedge-fund manager David Tepper famously told CNBC that stocks were in a no-lose situation.
If the market was actually recovering, stocks would go higher. If the economy stumbled again, Tepper predicted that the Fed would swoop in with QE2.
That’s exactly what happened… and Tepper’s appearance marked the beginning of a big rally that sent the S&P 500 up 85% over the next few years. Tepper has been right almost every step of the way since the bull market began in 2009. He was one of the most profitable hedge-fund managers last year.
Tepper recently did something most investment managers have been avoiding: He bought energy stocks. In the fourth quarter, his Appaloosa Management hedge fund bought positions in several companies in the energy sector.
The two biggest additions to Appaloosa’s portfolio were master limited partnership Energy Transfer Partners (ETP) and energy infrastructure giant Kinder Morgan (KMI).
ETP shares trade for less than half of what they sold for in November 2014. KMI shares are down more than 60% from their peak last April.
Tepper’s purchases suggest the beaten-down energy market is at or near a bottom. It’s hard to argue with him – his résumé speaks for itself.
And Tepper isn’t the only investing great buying energy stocks.
Warren Buffett’s $320 billion holding company Berkshire Hathaway also invested about $400 million in Kinder Morgan in the fourth quarter. And billionaire George Soros, who runs a hedge fund worth more than $5 billion, also bought a small position in Kinder Morgan last quarter.
Both Kinder Morgan and Energy Transfer Partners have benefited in recent days from their link to these big-name purchasers…
These investing legends expect things in the energy sector – and these two stocks in particular – to continue to get “less bad.” So far, their instincts are spot-on.
Good investing,
Brian Weepie
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Source: Growth Stock Wire