Here is my operating assumption. We are now in a secular bull market that began during the pandemic when crude went below 0. Commodity prices have gotten ahead of themselves and peaked in June of this year when both the commodities (NG and crude) hit yearly highs Both the commodities and the stocks have since entered into a rather severe correction but in my mind I see this as a correction in a secular bull market with stocks declining anywhere between 30 and 40pc.
We may not yet have reached bottom and Luckyones may well see further downside in commodities. But looking at fundamentals and Nuttals charts as well industry under investment driven by prioritizing return to shareholders let alone the political conditions related to the Ukraine war makes me think the return to commodities increasing in price are not far off. Of course the stronger energy the weaker will be the general market as the Fed will need to be more aggressive in offsetting commodity price increases and that may drag energy companies with it but not nearly to that extend. So my strategy is simple we are in a secular bull market currently in a correction and as the opportunity presents itself I will selectively add and or readjust between crude and natural gas producers depending on where I think the opportunities are. I am moving to those companies that have laid out a clear framework for rewarding shareholders. I am focusing on medium producers that offer both manageable risk and exceptional value as well as torque to higher commodity prices. I do write covered OTM calls but only on half of my holdings.
Take care
J