Yesterday, something happened in the stock market that hasn’t happened in almost 20 years.
Energy stocks closed at their highest level ever.
That might not sound like a big deal. Stocks make new highs all the time.
But this one is different.
The first time energy stocks got anywhere near these prices was back in 2008. That was 18 years ago.
Since then, we’ve had four different presidents, a financial crisis, a global pandemic, wars, an oil crash, even a brief moment when the price of crude went below zero.
Through all of it, energy stocks could never get back above their old highs.
Until now:
This is what we call a “breakout.”
Imagine a ceiling that a stock keeps bumping its head against. It tries to get through, but every time it gets close, sellers show up to push it back down.
Eventually, one of two things happens.
The stock gives up and falls away, or it finally breaks through the ceiling.
Energy just broke through a ceiling that’s been there since 2008.
That gets my attention.
You Probably Don’t Own Much Energy
Most Americans who own stocks have at least some of their money in the S&P 500, which includes 500 of the biggest companies in America.
When you put money into an S&P 500 fund, your money gets spread among companies like Apple (AAPL), Microsoft (MSFT), Amazon (AMZN), JPMorgan (JPM), and hundreds of others.
Here’s the part most people don’t realize: Only about 3% of the S&P 500 is invested in energy stocks.
That means if you have $100 invested in an S&P 500 fund, only about $3 of it is in energy.
The Dow has even less. Energy makes up only about 2% of the Dow Jones Industrial Average, and Chevron (CVX) is the only energy stock in the entire index.
And if you own a fund that follows the Nasdaq, you have almost no direct exposure to traditional energy companies at all.
For years, that wasn’t much of a problem. Technology stocks were going up and energy stocks weren’t doing much.
That’s why we watch the market instead of assuming that what worked for the last 10 years will work for the next 10.
Energy is telling us something right now.
We already own several energy stocks in our portfolios. We added to our energy positions last week.
And with the entire sector now breaking out to new all-time highs, I’m looking for opportunities to own even more.
Which brings me to Peter Thiel.
What Does Peter Thiel Know?
Peter Thiel is one of the most successful technology investors and entrepreneurs of the past few decades.
He helped start PayPal (PYPL). He was one of the earliest outside investors in Facebook, which is now Meta Platforms (META). He also co-founded Palantir (PLTR).
So when Peter Thiel puts a lot of his money into something, I think it’s worth taking a look.
Not because he’s always right. Nobody is. And not because he’s necessarily smarter than you or me.
But he’s certainly more informed than most investors. He knows a lot of people. He sees a lot of deals. And he has access to information and opportunities that most of us don’t.
A new government filing shows that Thiel’s fund owned about $76 million worth of Vista Energy (VIST) at the end of June. That’s roughly 1% of the entire company and a very large position for his fund.
Said differently, Vista Energy now represents roughly 18% of Peter Thiel’s disclosed public stock portfolio.
Vista is an oil and gas producer with major operations in Argentina.
Here’s where it gets interesting. Look at the chart:
Vista is doing almost exactly what we want to see.
For a long time, the stock went mostly sideways. Buyers and sellers fought back and forth without either side really taking control.
Now the buyers are winning.
The stock is holding above its Genesis Line and breaking out to new highs, right as energy stocks as a group are doing the same thing.
And one of the world’s most successful investors just disclosed a huge position in it.
Those three things together are interesting.
There’s one important thing to understand about these filings.
We don’t get to see what big investors are buying every day. Funds like Thiel’s periodically have to tell the government what stocks they own.
Those reports are called 13F filings, and by the time we see them, the information can already be more than 45 days old.
That’s why blindly copying them is a terrible idea.
If a fast trader owned a stock six weeks ago, they might have sold it five weeks ago.
But Peter Thiel isn’t a day trader.
So I’m not looking at this filing and saying, “Peter Thiel bought Vista, so we need to buy Vista.”
I’m looking at it as another piece of evidence.
Energy stocks are making new all-time highs after almost two decades.
Vista Energy is making new highs, too. And a very informed investor just made a very large bet on it.
The market was already telling us to pay attention to energy. Peter Thiel just gave us another reason to look.
We already own energy. We added to those positions last week. And I’m looking for places to add more.
Maybe Vista ends up being one of them.
Maybe we’ll find something even better.
Either way, after waiting 18 years for energy stocks to finally break through that ceiling, I’m not betting that this move is already over.
I think it’s probably just getting started.
Stay sharp,
JC Parets, CMT
Founder, TrendLabs