Trump's Agenda Could Spark an Energy Boom

The energy industry couldn't be happier with Trump's 'day one' promises...

The president-elect has set the stage for a bold transformation of America's energy sector.

He has outlined plans to cut through the regulatory red tape, ramp up domestic production, and drive economic growth through energy exports. He intends to reopen Alaska's Arctic National Wildlife Refuge for drilling and declare a national energy emergency.

In short, Trump's agenda is laser-focused on unleashing the power of American energy to fuel the economy.

Yet despite these sweeping promises, the market isn't paying attention...

Today, we'll look at why the energy sector is still undervalued – and how Trump's policies could create a massive opportunity for investors.

The energy sector has been stuck in a rut for years...

We can see this through the Uniform price-to-book (P/B) ratio, which compares a company's – or in this case, an entire sector's – total value with the value of the assets on its balance sheet (or "book").

The higher the P/B ratio, the more investors are willing to pay for its assets.

The average Uniform P/B ratio for energy companies has hovered around 1 since 2016. Said another way, investors haven't expected energy companies to make a profit in nearly a decade.

Take a look...

The market hasn't rewarded energy companies for their investments and growth potential... even as U.S. energy exports reached record levels in 2022.

But that could soon change. Trump's plan to cut regulatory barriers and supercharge production could finally unlock the growth investors have been waiting for.

By opening up more land for drilling and encouraging new investments, the Trump administration could create a ripple effect across the economy.

The U.S. has cemented its role as a global energy leader over the past decade...

Meanwhile, energy valuations have remained flat.

But in the coming months, U.S. energy companies should finally start seeing some benefit from their investments.

Trump has been clear that the U.S. will ramp up energy exports, giving the sector yet another way to make money. The energy industry could return to profitability for the first time in almost a decade.

That signals better efficiency and growth potential to investors... which drives higher valuations.

The president-elect's broader economic agenda also ties directly into energy. Higher production doesn't just benefit energy companies – it fuels growth in manufacturing, transportation, and infrastructure.

Energy stocks have been sitting in the bargain bin for years, ignored by the broader market...

With supportive policies on the horizon and investment set to take off, the sector is primed for a long-awaited transformation.

This is a rare opportunity for investors to get ahead of the curve. Energy valuations remain near historic lows... making it one of the few corners of the market where the potential upside far outweighs the risks.

And as these polices take hold, the industry's growth could become a cornerstone for the entire market.

Put simply, the energy sector is finally ready to shine.

Regards,

Joel Litman
January 16, 2025