Three Silver Linings for Oil Stocks

The old proverb “Every cloud has a silver lining” traces its origins back to the days of John Milton in the 17th century.

It came from a lesser-known work called Comus and has since been a common source of hope for us when life is troubling.

It’s been a valuable exercise for me to look for silver linings in the oil market, and over the last year, it’s been an increasingly difficult task.

At the start of the bear market last year, many media outlets touted the silver lining of the oil glut as cheap gasoline at the pump for Americans, who have, for over a decade, raged at the ever-increasing price of retail gas blends and diesel fuel.

I can’t lie; I’ve taken advantage of these cheap oil prices. I filled up my car this morning for an even $20.

However, I’ve been able to find some real silver linings recently, especially after a yearlong price plunge for crude…

For example, back before oil dropped below $100 per barrel, I had been dying to make another big Bakken oil investment, another pick to surge over 500% like one of my picks did when the fracking boom was just hitting its stride.

But for years, as you know, oil was simply too high to see the kind of gains I wanted, hydraulic fracturing too mainstream.

To borrow from Buffett, everyone was far too greedy.

Even with that in mind, however, let me show you what I mean…

Investment in the Bakken Slows Down

To see just how bad it’s become for oil stocks, look no further than Continental Resources (NYSE: CLR).

At one time, Harold Hamm’s drilling company was the darling of shale oil, the Bakken, and the hydraulic fracking boom. Today, though, the stock has been destroyed, and the company is in a tenuous position.

One look at the chart for the stock over the last decade tells the story…

You can see it all here: the dip from the recession, the incredible run of gains during the fracking boom, and the catastrophic losses at the start of the bear market are all visible.

No doubt it’s been a rough year for investors in Continental, which has seen its share price drop by $50 since the peak last summer.

And yet there’s the silver lining: You can see the stock ran up from around $10 to $80 a share after the catastrophe of the financial crisis, and now that it’s down again, you can see the opportunity for it to return to highs when oil prices come back.

Therein lies the rub.

You see, the key for investors is being able to hit both timing and opportunity. Will Continental succumb to its huge debt burden before oil returns to normal and its shares and profits bounce back?

The truth is that nobody can answer that question with absolute certainty, but I can tell you oil will go up — it all depends on who will take advantage of it.

Granted, I won’t be recommending Continental anytime soon, unless something drastic changes in its finances. Right now, according to Yahoo Finance, the company has just under $7 billion in debt and only $25 million in cash on hand.

That’s a tough situation, but luckily for us, Continental is just one fish in the Bakken pool. In fact, there are three North Dakota players with the same explosive potential today as the Bakken investment gems I found in 2009.

Three Bakken Stocks Under $5

The main narrative surrounding the Bakken in investment circles these days — that it’s toxic and should be avoided at all costs — is anything but the truth.

Even though oil is down below $50 per barrel — it went below $40 per barrel just a few weeks ago — producers in North Dakota have found a way to remain efficient.

As you can see in the chart below, oil production has remained relatively steady despite a massive drop in rigs…

Yes, yes, I know there hasn’t been growth, but it’s to be expected with the way prices are now. And this plateau in production has coincided with the decimation of any driller near the Bakken.

However, you shouldn’t let this stop you. I know I’m not.

While it’s true that things aren’t all sunshine and rainbows in Williston, North Dakota like they were about 15 months ago, it’s also true that the opportunity to make money is there.

I mean, if you bought at the top of the market in any industry, you’d be guaranteed to lose. Most of the time, you should be buying the bottom and waiting for the top to sell.

We’re in this exact situation with oil right now.

That’s why, not too long ago, I recommended to my Energy Investor readers three stocks from the Bakken that trade below $5. These are my silver linings, and I hope to see them eclipse some of my earlier Bakken picks in terms of gains — one of those early picks shot up over 500%.

If you’d like to learn exactly why I’m confident in these stocks, I strongly suggest you click here to discover your own silver lining in this bear market.

Until next time,

Keith Kohl

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A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing’s Energy Investor and Technology and Opportunity.

For nearly two decades, Keith has been providing in-depth coverage of the hottest investment trends before they go mainstream — from the shale oil and gas boom in the United States to the red-hot EV revolution currently underway. Keith and his readers have banked hundreds of winning trades on the 5G rollout and on key advancements in robotics and AI technology.

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