8 Ways to Make Money on Cheap Oil

Many energy stocks are on sale, but not all are worth buying. Here’s my strategy for playing the ongoing meltdown.

Just a little more than a year ago, oil fetched more than $100 a barrel, and the fear was that the price would rise even higher. Now, the price of a barrel of oil has plunged to $42, and Wall Street is awash in predictions that the price could stay low for years because of abundant supplies and global economic weakness, particularly in China, which curtails demand.

Markets, as anyone who lived through the tech bubble and subsequent bust knows, can go to extremes—in both directions. And calling a bottom is every bit as difficult as predicting a top. But it’s obvious that the stocks of companies connected to energy are a lot cheaper than they were a year ago—about 30% cheaper, based on Standard & Poor’s Energy index. That makes this a favorable time to consider the sector.

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Steven Goldberg
Contributing Columnist, Kiplinger.com
Steve has been writing for Kiplinger's for more than 25 years. As an associate editor and then senior associate editor, he covered mutual funds for Kiplinger's Personal Finance magazine from 1994-2006. He also authored a book, But Which Mutual Funds? In 2006 he joined with Jerry Tweddell, one of his best sources on investing, to form Tweddell Goldberg Investment Management to manage money for individual investors. Steve continues to write a regular column for Kiplinger.com and enjoys hearing investing questions from readers. You can contact Steve at 301.650.6567 or sgoldberg@kiplinger.com.