Elon Musk and Warren Buffett may not agree on everything, but they do see eye-to-eye on one thing: investing in commodities and alternative energy is a smart move in a world facing high inflation and low energy supplies. Here are three investment areas where these two icons agree…
At an energy conference this week in Norway, Elon Musk, the Tesla CEO, said the world needs “more oil and gas, not less,” while pushing the transition to renewable supplies. One way to get there is by investing in cheap oil and gas companies. And Warren Buffett, the Berkshire Hathaway CEO, has been doing exactly that, holding shares of Chevron (CVX) and buying up as many shares of Occidental Petroleum (ticker: OXY) as he can get his hands on.
Last week, Theodora wrote about how you can emulate Buffett’s oil and gas investments or diversify your sector exposure through the iShares U.S. Oil & Gas Exploration & Production ETF (IEO, expense ratio: 0.39%).
Alternatively, you can gain more global exposure through the iShares Global Energy ETF (IXC, expense ratio: 0.40%) or betting on individual companies like Shell, and Exxon Mobile.
Musk and Buffett have both been eyeing up alternative energy sources. However, while Musk has been working hard to promote greener energy through initiatives such as electric vehicles and solar and wind technologies, Buffett has been investing heavily in other, carbon-emitting alternative energy sources.
Berkshire Hathaway, under the leadership of Buffett, invested $6 billion in August 2020 in the five major commodity trading companies in Japan.
The largest of these five is Mitsubishi Corp., which has the highest exposure and sensitivity to profits from oil and coking coal. Coking coal is an alternative source of energy, and sharply rising coking coal prices were a key contributor to the company’s $3.87 billion in net profits in the second quarter of 2022.
Mitsubishi’s 6x price-to-earnings ratio and an annual payout ratio of 30% to 40% of net profits suggest that the company will announce a dividend increase or share buyback (or both) with its next results in November.
While not all of you are interested in Investing per say, trading CFDs on the Mitsubishi Corp. could be a good idea, let us know if you need help with picking a brokerage to speculate on this idea.
On Friday, Musk took to Twitter to voice his opinion that limiting the use of this energy source is detrimental to both national security and the environment.
Countries should be increasing nuclear power generation! It is insane from a national security standpoint & bad for the environment to shut them down.
— Elon Musk (@elonmusk) August 26, 2022
Buffett’s Berkshire Hathaway has long been investing in nuclear power, and its subsidiary PacifiCorp is partnering with Bill Gates’ TerraPower to build next-generation nuclear reactors. The first of these reactors is planned for construction in Wyoming.
More and more countries are saying they will extend the lifespans of their existing nuclear plants. The US, Belgium, France, and others are leading the way in this effort to keep nuclear power alive and well.
Even Japan, which idled nuclear plants after the 2011 Fukushima nuclear disaster, has said it would consider building new nuclear plants and restarting existing ones. This has led Germany to debate whether to continue running three nuclear plants that had been scheduled to close at the end of the year.
If you’re looking to cash in on the growing interest in nuclear technology, the Global X Uranium ETF (URA, expense ratio: 0.69%) is a good option. The fund tracks the Solactive Global Uranium and Nuclear Components Index.
We also love Comeco, the largest holding in the index. The second largest holding is Sprott Physical Uranium Trust – an ETF that buys and sell physical uranium (smth everybody would need if they are serious about their nuclear fusion).
If you are interested in the cheapest way to bet on the above, you know the drill, just reach out; otherwise, scan through the list of our sponsored brokers if you are interested in a bargain.
One option you may want to consider is investing in Kansai Electric Power, one of the largest electricity-generating companies in Japan. They would directly benefit from the nuclear reopening.
Although the US economy may barely avoid a full recession in the next 12 months, Europe and the UK are unlikely to be as fortunate, as they face a worsening energy crisis.
They won’t be alone either; in this era of high inflation and scarce energy supplies, many economies are likely to struggle. That makes these investments well-timed and poised for growth.