Article Date: 7/1/2001

street sense
Investing in Energy Stocks
Every investor should be aware of this key sector.

If you hope to successfully invest in the stock market, you must understand the energy sector -- because a healthy economy depends on the availability of cheap and plentiful energy.

Go back to the early 1970s to see the havoc that soaring energy prices can wreak on the stock market. That's when OPEC first flexed its muscles, and what a tenfold jump in oil prices did to stocks wasn't pretty. The Dow Jones Industrial average lost almost half of its value in 2 years.

Almost 30 years later, the United States is again vulnerable to another energy shock. But this time it's not just the price of oil that worries us, it's also the lack of sufficient energy infrastructure to refine crude oil and turn it into usable fuels. There's also a critical need for more power plants to produce electricity.

As the Bush administration attempts to grapple with existing and potential energy shortages, investors should consider possible opportunities in this key sector. In this month's column, I'll provide a brief breakdown of some of the major areas for investment in energy:

A sector with many choices

Whatever your tolerance for risk, the energy sector offers companies that can fit into your portfolio. But be sure to do your homework before you invest. 

Jerry Helzner has written more than 50 articles on stock investing for Barron's. He has been a regular stock market columnist for other business publications and was a member of the equity research department of a major regional brokerage firm. He's also an associate editor for our sister publication, Ophthalmology Management.

Optometric Management, Issue: July 2001