Record Gas Prices… Plus: A Great Opportunity To Grow Your Wealth Is About To Happen…
How high will gas prices rise? Could we see $5 or $6 per gallon nationwide?
I paid about $90 to fill up my truck a couple of days ago, and $30 to fill up my diesel can, which I use to burn brush out on our land. And my wife’s car, by the way, requires premium gas, thank you very much.
So we made a new family rule. We only buy gas at Sam’s Club from now on, where prices are consistently about 15-20 cents cheaper.
But we’ve got it easy compared to others. Nationwide, the average cost of gas reached $4.59 per gallon, , according to the American Automobile Association (AAA). Diesel is $5.57 per gallon.
Here’s more from AAA:
According to new data from the Energy Information Administration (EIA), total domestic gasoline stocks decreased by 4.8 million bbl to 220.2 million bbl last week. On the other hand, gasoline demand increased from 8.7 million b/d to 9 million b/d. Tighter supply and increased demand have pushed pump prices higher. This supply/demand dynamic, combined with volatile crude prices, will likely continue to keep upward pressure on pump prices.
Prices have climbed by 10 cents in just a week’s time. And remember, Memorial Day is just around the corner. That’s when demand typically spikes, thanks to good old-fashioned summer road trips. According to a recent survey from GasBuddy, even with record-high gasoline prices, 58% of Americans intend to hit the road this summer. That’s higher than last year, when gas prices were nearly $1.50 per gallon lower.
To be quite frank, as much as gas prices are a pain, it’s diesel prices that scare me the most. Most Americans have very little awareness of diesel, or the role it plays in the U.S. economy.
Because of its energy density, diesel is ideal for moving heavy payloads. It’s used in everything from 18-wheelers to freight trains to farm equipment. In other words, what we eat as well as getting the goods we need from point A to point B relies on diesel.
We’ll keep an eye on the situation as it develops. In the meantime, if you’ll recall, I mentioned a few issues ago that there will come a time when the market panic subsides. When that happens, it’ll present investors with a wonderful opportunity to buy.
And as you’ll read below, my colleague Jimmy Butts agrees, and offers some helpful advice on what to do (and which stocks to look at) when that time comes…
A Great Opportunity To Grow Your Wealth Is About To Happen…
Legendary college football coach Paul “Bear” Bryant is credited with coming up with the famous line, “defense wins championships.”
Bryant oughta know… he won more than 300 games, along with six national championships at the University of Alabama.
While this quote pertains to football, it is also very relevant when it comes to investing.
When things are looking shaky in the markets (like they are currently), then we need to play a little defense. We do that by pulling some profits, cutting losers, raising cash, and rotating into more defensive stocks like gold and utilities.
Since the beginning of the year, we’ve certainly played some defense over at Capital Wealth Letter. I’ve warned (here and here) that I see trouble brewing in the stock market and our economy, warning readers to put stop-losses in place in order to protect profits. We even added more exposure to gold in our portfolio. (I explained why gold is due for a bullish move here.)
But today I want to touch on the other part of Bryant’s quote that is often neglected…
The full quote is “offense wins games… defense wins championships.”
The truth is, during difficult times in the market, we can’t just focus on our defense. That’s important, of course, but our offense also has to be ready. We can’t just get scared and batten down the hatches. We need to simultaneously be thinking about our next moves when the dust settles.
Here’s the major reason why: The big secret to quickly generating significant returns boils down to investing in major market disconnects.
Why It’s Time To Start Looking For Market Disconnects
Market disconnects take place when the price of a given stock or asset class gets “out of sync” with reality. It doesn’t happen often… but it does, it gives us a rare opportunity to purchase high-quality investments at rock-bottom prices.
You can bet that in the aftermath of this market chaos there will be some wonderfully lucrative deals. But if you’re not prepared ahead of time, you may miss out. Or if you’re too focused on defense and you’re gripped in fear then, unfortunately, that will also dampen your potential returns.
Disconnects can be found anywhere. Again, these are situations where the value of a security just doesn’t match up with the underlying facts.
One of the most recent disconnects that we invested in was in the summer of 2020. That’s when one of my favorite businesses went on sale. It was a glaring opportunity, yet the market didn’t want anything to do with it…
In August 2020, the S&P 500 had nearly recovered from its devasting losses at the onset of the pandemic. It was the quickest selloff and rebound we have ever witnessed. In just three weeks, the market went from all-time highs to falling off a cliff. Quite literally. It dropped over 30% in a few weeks and bottomed in March 2020.
Yet, by August the market had nearly reversed all those losses, skyrocketing by 45%. Remember, a 30% loss requires a 43% gain just to get back to even.
Despite the market’s stellar performance, my favorite industry — property and casualty (P&C) insurance — was still more than 20% off its February highs. Here was the chart I showed my premium readers…
There was a disconnect… Granted, it made sense why investors were skeptical. Insurance companies are inherently betting that events like (Covid-19 deaths, rioting, looting, burning of businesses, etc.) won’t happen. Especially all at once. But I knew that these things would pass. Insurance companies have endured pandemics and catastrophes before and survived. Plus, looking back, it’s easy to see how the auto insurance business in particular could boast some pretty lofty margins. Nobody was driving or getting in wrecks, yet we all still forked over that car insurance premium each and every month.
So I recommended American Financial Group (NYSE: AFG).
I was convinced that this disconnect couldn’t last forever. And sure enough, in less than two years that investment has paid off handsomely…
To say we’ve crushed the market might even be an understatement… I knew the stock would likely outperform the market, but even this topped my expectation.
But that’s the power of investing in market disconnects.
Build Your Watchlist Today
When things settle down and we find a market bottom (whenever and wherever that might be), you will want to be ready with a list of your favorite companies that you can begin buying immediately. Or be ready to add to your position if you currently own them.
Kick off your list with best-of-breed companies — those with consistent revenue growth and generating enormous amounts of free cash flow. You can easily find these line items at sites like Yahoo! Finance under the “Financials” tab after you’ve typed in the stock’s ticker symbol or company name.
Here’s a list of world-class companies to help you get started…
- McDonald’s (MCD)
- Microsoft (MSFT)
- Walmart (WMT)
- Costco (COST)
- McCormick (MKC)
- Starbucks (SBUX)
- Packaging Corporation of America (PKG)
- Mondelez (Nasdaq: MDLZ)
- Lockheed Martin (LMT)
- Republic Services (RSG)
- Salesforce (CRM)
- Mastercard (MA)
Longtime Capital Wealth Letter subscribers will be familiar with some of these names. That’s because they all share traits that make them excellent long-term investments.
To be honest, some of these companies should already be in your portfolio. Don’t hesitate to add to those positions when the time is right. I do want to point out, however, that this list should act as a starting point for your own due diligence. I haven’t done deep dives on these stocks. Yet…
P.S. In the meantime, my colleague Nathan slaughter has found a small-cap oil outfit operating out in West Texas that is sitting right on top of the largest oil reserve in history…
With enough oil to independently power America for the next 49 years, you won’t see this covered on the nightly news… But some heavy hitters are making big investments in this area — and this little-known company stands to profit the most. Go here for details now.