As Energy Prices Rise, Fight Back With Investments

Lately, it seems like every time I turn the TV to news, finance or political programming, you hear consumers and politicians whining about the recent run-up in energy (particularly gasoline) prices. Although this complaining seems to be partially justified, few have answers to the continuous rise in demand and market assessed risk that remain the force behind rising fuel costs. In a capitalist economy, you have to accept the fact that markets set the price. Higher demand and risk mean higher fuel prices. If illegal price gauging activity is present in the marketplace, then by all means Congress and the justice system need to take action. However, in the previous 30 investigations led by the FTC, there has been no conclusion of wrongdoing.

Instead of sitting on your hands, upset about the higher cost of your summer vacation, hedge against fuel price inflation by investing in energy companies. As a sector, energy has performed well this year, especially oil exploration & drilling companies and refiners. These stocks are only beginning their upward summer trends. Baring a significant political or economic change in the industry, energy stocks should continue to increase in price, running up another 50% or more in some cases. Profiting from investments during inflation in energy prices helps to hedge your earnings and protect your wealth and purchasing power. Here are some ideas for investors:

If you are conservative in your stock selections, go with a typical big name driller or refiner. Some names to look at include Valero Energy -VLO- (still extremely undervalued using valuation measures), Marathon Oil -MRO-, Transocean -RIG-, or Exxon Mobil -XOM-.

For investors desiring higher earning potential, I recommend some energy plays abroad. Recently, international oil and gas companies have experienced significant stock price advances. Nevertheless, many of these companies remain undervalued when taking into account their projected earnings and revenue growth rates. Some companies to consider include Buffett-owned Chinese giant PetroChina -PTR- (AKA China National Petroleum Corporation, a stock I will discuss in my China sectorsnap later this week), Argentine emerger Petrobras Energia Participaciones S.A. -PZE-, and the Brazilian integrated Petroleo Brasileiro -PBR-.