Energy covers everything from the oil majors to small alt-energy start-ups. This is a tricky sector. If you don’t pick and choose carefully, you could easily lose your shirt.

For example, I’m not touching the oil majors right now. Even as they grow their profits, their oil production and reserves are shrinking. Their offshore production and pipelines are under attack by militants in Nigeria. Their joint ventures are under government attack by Russia and other countries looking for a bigger piece of the pie. It’s become an unfriendly world for Big Oil. And they don’t seem to know what to do about it.

Energy has a few places where investors can do very well. But it certainly isn’t a haven. Then what is?  

• Retail? It’s the third-worst performing sector in the S&P 500 during the past three months. Low-cost retail should do relatively well. But it’s no haven. If it were, you wouldn’t have to try to figure out why Wal-Mart (WMT) is doing well and some mega-stores like Costco (COST) aren’t.

• Precious Commodities? A surprising laggard that has lost investors some money over the past three months. I talk about gold below so let’s turn our attention to non-precious commodities for a moment.

A combination of bad weather, accidents, and project delays are pushing prices to record highs. Will this last? Could they go even get higher? Not if the economic slowdowns in the U.S. and Europe leak into Asia.

• Oil services? I’ve recommended overseas integrated oil companies, publically listed state-controlled oil enterprises, rig contractors, oil tankers, and oil pipelines. Half these companies were up last week – and my oil tanker – Tsakos Energy Navigation (TNP) – did the best. It rose 3 percent last week.

But since the beginning of the year, it’s no contest. The rig companies are my best oil-related companies by far.

Source: Plunges and Crashes and Bankruptcies, Oh My

That which does not kill us makes us stronger.
Friedrich Nietzsche

They must have noticed that we’ve entered into a recession. Aren’t they worried about their own earnings? With consumer spending slowing, who’s going to buy their products and services?

We know for a fact that companies are nervous because business spending is down. And if “nervous” is too strong a word, at least they’re uncertain enough about the future that they’ve put many of their purchases on hold.

Yet, the oil tanker company in one of my trade service portfolios – Tsakos Energy Navigation (TNP) – is treating the credit crunch like a gift from heaven.  Some shipping companies have lost the financing they were counting on to pay for new tankers. And TNP plans on taking full advantage of these canceled orders by scooping up these ships at huge discounts.

Then there’s the REIT in my INCOME portfolio. (This is a brand new recommendation I’ve made to my paid subscribers. I’m not allowed to reveal the name of this company at this time.). It’s pretty small. Its market cap is less than a billion dollars. Yet, it’s drooling over the current market. It has a generous credit line underwritten by a half-dozen banks. And when it uses that up, it plans on pulling in some joint-venture partners to help it buy up bargain-priced property with cap rates of 9-11 percent right now.

Neither of these companies are blue chippers with deep pockets. But they will more than survive the economic crisis we’re in. They’ll get bigger and stronger. And, as a result, their share prices should shoot up.

These companies are out there. Among the gloom and doom, their CEOs are saying bring it on. We’re ready. We’re going to come through this bigger and stronger. Their annual and quarterly reports give the same message, though more muted and qualified, as these reports tend to be.

Of course, companies love to spin. So some of this will be bluster. But if you’re too cynical and unwilling to dig a little deeper, you’re going to miss out on some great opportunities.

Money makes the world go around
The world go around
The world go around
Money makes the world go around
It makes the world go ‘round.
Cabaret: “Money”