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When Should You Take Profits On Energy Stocks?

The last year or so has been a very satisfying time for me in investing terms. As you may know if you have been reading my scribblings here for a few years, I have been saying for some time that energy would recover, and it has done so spectacularly over the last twelve months. The sector ETF, XLE, has roughly doubled in that time, but some of my portfolio favorites have done even better than that. Stocks like FANG, up around 300%, EOG, up “only” 200%, and RIG, which has gained around 400%, have had great years.

You may think, given that I wrote just last week that I still think $100 oil before year’s end is a distinct possibility, that I would continue to ride that particular horse. I might get a bit bored, but I could always spend my time laughing at the Jim Cramer’s of this world who, lest you forget, just a year ago told us all that oil and oil stocks were a “perma-short”. As we used to say in the interbank forex market, “How you left, Jim?”.

Surprisingly, though, what I will be doing over the next few weeks is selling some of my energy stocks into any rallies we may see from here. Just as Cramer was a fool a year or so ago to look at cyclical weakness and declare it a forever trend, so I would be foolish to see the current strength as inevitably lasting forever. There is almost bound to be a pullback in energy stock before long and it could even come as oil continues to climb. Markets look forward, and if fuel…

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