Don't Whine About Oil Prices, Profit from It (Or at least Hedge)

In today's CNBC Show "Mad Money", Jim Cramer tells viewers to try to profit from increasing oil prices rather than "freak" out over the price of gasoline.

Jim Cramer pointed out three reasons why oil prices are high:

1. Oil Fields are Drying Up
   
2. It is more difficult to find new oil and get it out of the ground.
   
3. Demand for oil is growing very fast especially in China, India and the rest of the Developing World.

Jim Cramer then used this introduction as a way to introduce some wildcat companies, those companies who are looking for oil.

Hedging For the ETF Investor

Some investors may be mainly ETF investors, and choose not to spend time picking individual stocks.

One way to hedge or profit against rising oil prices is to invest in the ETF with the symbol "USO". USO has a high correlation to the price of oil. USO mainly reflects "the spot price of West Texas Intermediate (WTI) light, sweet crude oil."

For the Stock Picker

For the stock picker, there are many ways to profit from rising oil prices.

We highlighted the different ways and selected companies in Part 1 of the Long Term Trends: Energy, Oil, Coal, Nuclear, and Cleanup.

Cow Power (Methane) Can Help Save Our Environment and Save our Future

Do not underestimate the Power of the Cow in terms of saving the environment and providing us with energy.

Cows (and a few other animals) can provide us with power and energy through their manure (the average dairy cow creates about 100 pounds of manure a day). Manure naturally releases methane gas into the atmosphere.

Companies, such as Utility Company PG&E (PCG), can take this manure and flush it into a tank or a tented lagoon, where the manure can decompose and the methane gas bubbles off, before being captured under the cover. The gas is then pumped from the digester, then purified and compressed into gas pipelines. After purification, the methane gas is the same as traditional natural gas, except that it's renewable and cleaner.

Cow Power Can Save the Environment Too

If we allowed the methane gas just to reach our atmosphere, this would be harmful to the environment. It is said that methane gas is 20 times more damaging to the environment than carbon dioxide.

PG&E

A lot of the information above comes from PG&E (PCG), the Utility Company. It has a forward PE of 12.73, a yield of around 3.60%, and a five year estimated growth rate of 7.73%. Incorporating the dividend yield in the PEG ratio, PG&E has a PE to Growth Ratio of around 1.12, which is a reasonable value.

They also provide a website:
www.wecandothis.com

and click on the Cow Power link.

Long Term Trends: Part 1: Energy, Oil, Coal, Nuclear, Cleanup

Forever Portfolio Series

James Altucher, of TheStreet.com and Stockpickr.com, is writing a book: The Forever Portfolio: How to Pick Stocks That You Can Hold for the Long Run.

James Altucher hopes to show investors how to build a strong, consistent long-term portfolio, diversified enough to withstand the various cycles of the market.

Inspired by this, we will be starting a series over a period of time highlighting some long term trends. Some of the trends may be working right now, but some of them may start several years from now but last a long time.

Energy

Energy is a long term trend. Oil price is zooming. Demand will be increasing over the long term as countries all around the world, especially those countries in the emerging markets (such as China and India) demand more energy and oil.

Supply will remain limited, and rising energy prices (or consistently expensive energy prices) will remain a long term trend.

Integrated Oil Companies

Some integrated Oil Companies to look at:

1. Exxon Mobil (XOM)
   
2. Conoco Philips (COP)
   
3. CNOOC (CEO), Chinese Oil Company
   
4. Petro China (PTR), Chinese Oil Company
   
5. Petrobras Energia (PZE), South American Oil Company
   
6. Lukoil (LUKOY.PK), Russian Oil Company
   

Oil Services and Exploration

Oil companies need help searching for new oil, drilling, extracting oil from oil sands, and all other forms of help. Some of these oil services companies could benefit.

1. Schlumberger (SLB)
   
2. Halliburton (HAL)
   
3. Transocean (RIG)
   
4. National Oilwell Varco (NOV)
   
5. Nabors (NBR)
   
6. Ensco International (ESV)
   
7. Petroleo Brasileiro (PBR)
   

Canadian Oil Sands and Other Energy

Canada has the Largest Crude Oil Reserve, but much of it is in Canadian Oil Sands, which can be difficult to extract, but becomes profitable as energy prices remain high.

1. Suncor (SU)
   
2. Canadian Natural Resources (CNQ)
   

Natural Gas

As oil zooms higher, other forms of energy resources are needed and this incldues Natural Gas.

1. Chesapeake Energy (CHK)
   
2. Canadian Natural Resources (CNQ)
3. Andarko Petroleum (APC)
   
4. Encana (ECA)
   
5. Devon (DVN)
   
6. Apache (APA)
   

Oil and Gas Pipelines

Gas and Oil needs to transported.

1. Williams Co (WMB)
   
2. Spectra Energy (SE)
   
3. Enbridge (ENB)
   
4. Kinder Morgan Energy (KMP)
   
5. El Paso Coroporation (EP)
   

Refinery

Oil needs to be refined.

1. Valero (VLO)
   
2. Marathon Oil (MRO)
   
3. Sunoco (SUN)
   

Oil Shipping

Oil needs to be shipped all around the world.

1. Frontline Ltd (FRO)
   
2. Nordic American Tanker Shipping (NAT)
   
3. Overseas Shipholding Group (OSG)
   
4. Teekay (TK)
   

Coal

Coal is one of the most inexpensive forms of fossil fuel. Some people complain about the environmental implications. There are new technologies out there.

1. Peabody Energy (BTU)

Coal Services

1. Bucyrus (BUCY)
   
2. Joy Global (JOYG)
   

Railroads for Coal

Railroads are needed to transport energy products such as coal:

1. Union Pacific Railroad (UP)
   
2. CSX Transportation (CSXT)
   
3. Norfolk Southern Railway (NS)
   

Nuclear

Nuclear can provide a lot of energy for very long time, but detractors do not like the environmental implications.

1. Cameco (CCJ)

Environmental Cleanup including Nuclear

With all these byproducts, the environment needs to be cleaned up.

1. American Ecology (ECOL)
   
2. Clean Harbors (CLHB)
   
3. Energy Solutions (ES)
   

Alternative Energy

Alternative Energy is still a very speculative area, but if you wish to research, you may. Alternative energy includes ethanol, bio-fuels, solar, wind, and even wave power. As of this moment, more funding will be put in alternative energies in a world where energy prices are zooming too high. Students and researchers will be researching new and more profitable ways to provide energy.

1. First Solar (FSLR), A Solar company
   
2. Any Agriculture Company
   
3. Energy Conversion Devices (ENER)
   
4. Imperial Sugar (IPSU), another source of ethanol
   
5. Toyota Motors (TM), a leading hybrid engine car company
   

Water, Energy, and Minerals with Layne Christensen (LAYN)

Today, on Mad Money, Jim Cramer seems to have offered no opinion on Layne Christensen (LAYN). While it may initially sound like a retailer, Layne Christensen is really a good $1 Billion industrial company.

Layne Christensen (LAYN) provides drilling and construction services for:
1. Water and Wastewater Infrastructure (largest part of the business)
2. Mineral Exploration (2nd largest part of the business)
3. Energy
4. Other

All sectors are in bull market mode. Water and water infrastructure is a critical need in the US and around the world. Some people consider water to be the next Oil.

Mineral Exploration is also very important. Basic minerals are important to help global growth. The same situation occurs with energy.

Layne Christensen (LAYN) has a forward PE of 26, 5 year estimated growth of 31% for a very cheap 0.83 PEG ratio (under 1 is very cheap).

Stock is very strong, and has reached its 52 week high.

Recently, however, the company announced that it may be selling $172 Million worth of shares. Having more shares in the market dilutes the value of each share.

Maybe, after more research, you should consider Layne Christensen (LAYN) on a pullback or after all the extra shares are offered on the market.