If you’re new to investing, placing a modest amount of your hard-earned savings into stocks is a great way to start. Much of the world’s cash is already in stocks, also known as equities, referring to the equity that owners possess liability-free of their companies.
This means they own their profits too. For you, this means long-term earnings. Consider the possibilities of what you can do when you’re making much of your annual income by logging onto an online brokerage account and hitting buy. This article will dive into two hot stock sectors for 2022: energy and shipping.
Start with supply and demand. If demand exceeds supply, prices will rise. The opposite is true. Even though there are many possible investment strategies, we’ve got to start with demand.
For energy, this is the global consumption against production of crude oil. Then we monitor the inventory balances of crude oil on a broad level, such as with the USA and EU. Then consider expected ongoing developments: Is a war brewing? Are there major weather events affecting oil tankers? How much more oil can the USA produce?
People often talk of the Middle East when it comes to oil, but the USA is the world’s largest producer. And there are over a trillion barrels of oil reserves in the world today. Still, it’s all about supply and demand. If they were all released, the price might be a few dollars only. And who needs a trillion barrels of oil right now?
From there, we apply the essential principles of stock investing. Let’s say hypothetically, the price of crude oil will rise by 20 USD in the next three months. Which companies are best poised to gain?
Depends on the company. What you want to see will include:
A strong track record and history in discovering oil wells and bringing them to market.
An impressive portfolio of oil reserves, like with Texas or North Dakota.
A solid management team with decades of experience.
A good accounting profile. How is the balance sheet? Are their earnings consistently improving? How about their dividends? Do they have spare cash to deploy?
When the price of crude oil last fell, how did their stock price react?
What is the price of each stock relative to its earnings per stock? Sales per stock?
Master these basics. In no time, you’ll be a veteran energy stock researcher following the daily news while keeping your online brokerage account active on the second screen.
Shipping and energy go hand-in-hand. What’s the point of extracting oil from the earth if you can’t get it to the car?
Shipping is not only ships, but is an umbrella term also including:
Air: dedicated air freighters.
Rail: the traditional rail industry.
Freight: the truckers.
Yet the dominant sector is the maritime side, the division of supermassive oil tankers captivating photographers worldwide. A beginner should focus on maritime before delving further.
Supply and demand. The foundational basics of reading shipping stocks account for:
Overall GDP growth.
Growth and status of merchant ships.
Value of the goods moved around the world each year.
The status of major shipping routes: are they flowing smoothly, or are there traffic jams?
Are shipping charges rising on average?
Likely you already know about the issues major shippers are facing across ports due to the coronavirus. The pandemic prompted sharp increases in both e-commerce and illness-related backlogs in shipping. This spells opportunity.
Online Brokerage Accounts
Thanks to technology and perhaps, thanks to coronavirus, it’s now possible to open a new online brokerage account in minutes.
There is no better time to learn how to trade. The world is going remote. Many tech and finance companies have transformed into digital networks rather than tall office towers. You can learn online, research online, and trade online. Why not get started today?