Tags: Nick Hodge | Energy | investment | dummies

Investment Director Hodge: It's Time to Focus on Energy

By    |   Monday, 23 Sep 2013 02:26 PM

It's the ideal time to focus on energy, says Nick Hodge, investment director of Early Advantage. But making money requires understanding the market, top to bottom.

The energy sector is complex, with many moving parts and different fuel sources. Knowing what to analyze or where to start is challenging, Hodge tells Newsmax TV in an exclusive interview.

If investors want to get in the energy game “it's crucial” to understand the political backdrop that surrounds energy markets, in the United States, the Middle East and across the world. But the starting point for investors should be supply and demand, says the author of "Energy Investing for Dummies."

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Whether it's oil, natural gas, or another form of energy, you have to know how much the world uses and how much is supplied to know what prices are going to be, he insists.

Take uranium, some people question whether it has a future. Hodge thinks it does.

“You have 15 to 30 percent of the world's electricity being provided by this fuel source and if you take it offline...there's nothing to take its place right now,” he said.

To make money in energy, investors must be prepared to do a lot of reading and sift through a lot of data. Hodge advises investors to “start at the top” with the big national oil companies and move to the integrated majors.

Focus on their balance sheets, annual reports and reserves. But be careful to keep reserves in their proper perspective.

Experts claim the right decisions could put the US on the path to energy independence within a decade in part due to optimism about production from shale.

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“At what price are the reserves going to be economically viable?” Hodges asks.“So, right now, the marginal cost of oil production in the United States is $104 a barrel. If prices go much lower than that, the shale producers aren't making any money.”

“So reserves aren't production, he emphasizes.

The U.S. is nowhere close to its peak production levels of the 1970s. And Hodge doubts the energy independence story “unless there's some major alternative energy breakthrough that allows us to harness some renewable asset more viably.”

Alternative energy faces its own set of challenges and one is resistance from people who believe those industries must be subsidized.

Hodge isn't a supporter of subsidizing any industry, but he says it needs to be “apples to apples.” No subsidies for alternative energy should mean no subsidies for the oil industry.

“It's always best to just let the market decide,” he said.

As investors delve into energy, they'll get acquainted with the high profile issues and learn fact from fiction.

And just in case there's any confusion, Hodge warns retail investors to steer clear of futures and options markets. Instead of putting money in a futures contract, he suggests a fund that tracks the same commodity price.

There are imperfections with some of the ETFs he admits.“But at least investors can get in the game “without having to pony up the huge sums for the futures contracts.”

“It's better than nothing at this point,” he says.

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It's the ideal time to focus on energy, says Nick Hodge, investment director of Early Advantage. But making money requires understanding the market, top to bottom.
Nick Hodge,Energy,investment,dummies
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2013-26-23
Monday, 23 Sep 2013 02:26 PM
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