‘Energy is a hedge against everything going wrong’: Joe Terranova

Oil has been in a downtrend over the past three months but Joe Terranova (Chief Market Strategist at Virtus Investment Partners) remains convinced the energy trade is not over yet.

Energy is a shield against stickier inflation

The sell off, he added, creates opportunity for investors to pick energy stocks at a discount and position their portfolio for a stickier than expected inflation. This afternoon on CNBC’s “Halftime Report”, Terranova said:

I view energy as a hedge against everything going wrong. If Chair Powell continues to raise rates and not be able to combat inflation, the reason will be because energy prices remain stubbornly high.

Quoting the macro environment, he said there’s a risk to the upside in energy prices, especially since China is yet to fully recover from the COVID shutdowns.  

Oil sits at just under $90 a barrel at the time of writing.

Three energy stocks you should consider

Building on the conversation, Cerity Partners’ Jim Lebenthal named Exxon Mobil Corp (NYSE: XOM) a stable, one of the more reliable ways to play “energy”. He’s bullish on Transocean LTD as well but cautions:

Transocean is highly risky. But if these day rates continue to go up on oil rigs, it’ll be many multiples of its current share price. That said, upside down balance sheet. So, don’t go rushing into Transocean. Do your homework.

Lebenthal also recommends Kinder Morgan Inc (NYSE: KMI) – one of the largest energy infrastructure companies in North America particularly for investors in search of a steady dividend.

Last month, the Houston-headquartered firm reported better-than-expected revenue for its fiscal Q2.