Advanced Strategies
Energy stock movers and shakers
By Howard L. SimonsStocks and commodities are different — or at least they
should be. A commodity is a process input; you buy crude oil to refine it into products
whose economic value should be greater than the crude oil consumed. A stock,
even though some people burst out laughing at the next part of this statement,
is the discounted stream of future dividends. Its value reflects the net
profitability of the operation, interest rates, the effects of indexation and
other factors extrinsic to the firm.
And yet increasing
numbers of investors, including institutions, have been trading commodity-linked
equities as proxies for the commodities themselves during the post-2002
commodity boom.
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