Are energy investments right for you?
There are many different types of energy investments out there, with many more companies making up each different sector. Before you select a specific equity to buy into, it is important to understand the underlying business, so you can properly evaluate a company’s strengths and weaknesses, and its long-term potential. This can be a daunting challenge if you lack a background in any particular industry. Fortunately for investors, there are ample sources available for us to self-educate. For the sake of continuity, I’ll continue to use natural gas and solar power as our examples.
Getting to know natural gas
Most people are familiar with natural gas as a way to heat their homes, light up their stovetops, or fire up the grill. “Fracking” has become a buzzword, and most Americans now know that it’s the reason behind our tremendous volumes of cheap natural gas. To find the best investment in this space, it’s crucial that investors know exactly what natural gas is and how it is produced, but it’s also important to know the larger macro story and how the price of gas is affected by drilling and, potentially, exports.
Don’t be deterred. There are basic primers available at Fool.com to get you started. For example, “Natural Gas 101” explains what natural gas is, what the units of measure mean, and who the top producers are. “Natural Gas 201” goes on to explain where the gas comes from and how it is produced, while “Natural Gas 301” tackles the important details presented in quarterly and annual reports. And finally, fellow Fool Dan Dzombak has put together a history of the natural gas macro story, featuring 15 easy-to-read charts.
Solar time
The situation is much the same for solar power. Not all solar investments are created equal — in fact, some are downright terrible — but before we start picking and choosing our favorites, we should check out Jeremy Bowman’s primer on how the technology works in the first place.
Once we have that foundation in place, we can check out what the Fool’s resident solar expert, Travis Hoium, has to say about the best and worst solar investments. Once you have a handle on what you want to see in an investment, you can track your companies with weekly updates on your way to making an investment decision.
Foolish takeaway
We all know we can’t make the exact investments that Warren Buffett makes, but we can certainly pay attention to the types of investments he targets and, at the very least, consider them for ourselves. Energy is certainly one of the more worthwhile options, as it isn’t going out of fashion anytime soon.
The article Warren Buffett Loves Energy Investments. Should You? originally appeared on Fool.com and is written by Aimee Duffy.
Fool contributor Aimee Duffy has no position in any stocks mentioned. Click here to see her holdings and a short bio. If you have the energy, follow her on Twitter, where she goes by @TMFDuffy. The Motley Fool has no position in any of the stocks mentioned.
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