Energy Bill Winners

08/19/2005 12:00 am EST

Focus:

Jim Jubak

Founder and Editor, JubakPicks.com

"I can't say I think much of the Energy Bill" says Jim Jubak. Here, politics aside, he looks at what the bill does do and doesn't do, and then suggests five stock recommendations that he believes will be winners as a result of this recent legislation.

"As an energy bill, the current legislation doesn't do anything to cut US oil consumption. And the bill doesn't do much to cut US reliance on imported oil and gas. Yes, there are tax breaks and subsidies galore for domestic oil and gas production. But absent some reduction in the growth of consumption, the gap between what we pump out of the ground from aging oil and gas fields and what we consume will just get wider. The bill does nothing to tax carbon emissions. This amounts to a huge subsidy to oil, gas, and coal-based energy production.

"So what does the bill do? It gives federal officials the power to determine sites for LNG terminals, overriding state and local rules if necessary. Currently, the US has only four LNG terminals. If we're going to rely on imports for 21% of our natural gas needs, we're going to need a lot more terminals. It puts more ethanol into our gasoline. That is, of course, good news for farmers who grow the corn that's used in ethanol. And it keeps us firmly committed to the big-infrastructure model of energy production. That means lots more pipelines, transmission lines, port facilities, and railroads. Thus, my five energy bill winners play into those trends, both in what Congress didn't do and in what Congress did.

"Coal is even more firmly king of domestic energy after this bill. My preferred coal stock is Peabody Energy (BTU NYSE). But owning just about anything in the sector should be a good investment, even from current price levels. More boom times are ahead in the farm belt, at least if you grow corn. Think of the doubling of ethanol production over the next seven years as a huge guarantee that current good times for farmers have much longer to run. My preference is Deere (DE NYSE), a pure play on the farm equipment market.

"Build we must, if we're going to import all that LNG. And as this bill makes clear, Congress is committed to building these ports no matter how local residents feel about them. My pick here is Chicago Bridge & Iron ( CBI NYSE), a construction company with extensive overseas experience in designing and building these terminals. We must get it from here to there, by pipe or rail. My sector picks are TransCanada (TRP NYSE), a pipeline-industry leader well placed for growing oil and gas traffic between the US and Canada, and Buckeye Partners (BPL NYSE), which is engaged in oil transportation and storage."

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