To most people the answer probably seems obvious but then again there are tons of variables's to consider when buying into any sector.
In the case of oil and gas stocks they are at historic highs in terms of revenues and profits.
But does that guarantee if you invest in the sector or individual stocks that you will make money? Not necessarily.
In fact conventional wisdom might tell an astute investor that the stock is over bought and ready for a downturn.
Others might say that the market has already factored in the massive rise in oil and gas prices and stay clear...
danger lurks.
Still others might say the stocks can only up as there is no significant downward risk in the price of oil and gas and demand remains high so people will continue to purchase the commodity no matter what the cost.
Does anyone really know the answer? My guess is that the individuals who are responsible for this historic rise are fairly well versed in the upside potential.
With all these questions and more that we have not discussed what should the individual investor be doing if they are looking for an oil and gas play? Well the most obvious decision would be to find those stocks within the sector that still appear to be undervalued based on future earnings.
Easy said than done.
Let's use a really far out example of what could dramatically shift the fortunes of oil companies and those who have invested in them.
Let's just suppose for a minute the people of this great country all of a sudden decided and were actually able to carry out a complete boycott of gasoline for say one week.
In that time we all stopped driving unless absolutely necessary.
What do you think might happen? Well for one, demand would overnight shrink to a fraction of what it was before the boycott and thus in a perfect world prices should go down accordingly.
Let's look longer term and suppose that we as a united people could actually do this for say 6 months.
Profits and demand would plummet as would the price of the shares.
Now no one has a crystal ball when it comes to making such a call but you can easily see how fragile that sector might be and how vulnerable it could be with a sudden and rapid decrease in demand over a long period of time.
Because the markets in general are unpredictable it really pays to have some type of system in place that would enable you to weather the storm.
By using the AEStocks system you can do just that.
Go check us out at AE Stocks.