The Case for Investing in Energy

Oil prices declined a lot in 2014. That caused a lot of people to liquidate oil investments. It also caused some other people to wonder when would be a good time to buy some energy assets cheaply, anticipating a rebound in prices. Don’t waste your time trying to identify “the bottom.” You’ll know it only after the fact. Instead, build positions gradually when you think prices are low enough. Here’s an interview with a successful investment banker who says he’s been mostly holding cash the last few years but now is beginning to look seriously at distressed energy properties. He says he hasn’t bought yet, but is close.

But with West Texas crude prices now down by 50%, to $50 a barrel, and many U.S. oil and gas companies scrambling for cash, Beal has been quietly building an oil and gas lending team at his Texas bank, and though he has yet to close on his first deal, he expects to pull the trigger soon. “We are trying to get real active in the oil patch,” he says. “We’re looking at some decent-size deals, hiring people–we are going to go after it.” According to Beal, volatility will become the driving force in markets once the Fed actually begins raising rates. But this will have little effect on the inevitability of oil’s long-term price appreciation.

Andrew Beal, 62, is one commercial banker investors should pay attention to. With a self-made fortune estimated at $12 billion, he is the Warren Buffett of the banking business. Just as Buffett runs his insurance-centered holding company, Berkshire Hathaway , almost as a personal hedge fund, so, too, does Beal run his bank. But unlike Buffett, Beal doesn’t have to entertain shareholders at annual meetings because he’s the sole owner of Beal Bank, which has 37 retail branches and $3.6 billion in deposits insured by the Federal Deposit Insurance Corp.