Rick Rule Investment Strategy: Love the Most Hated Stocks

Rick Rule has a simple investment strategy, love stocks and commodities that people hate and then make a ton of money. Lets take a look at what is on top of Ricks hated list and why he loves Uranium, Oil and Coal, the worlds most hated stocks.

Rick Rule Investment Strategy: Love the Most Hated Stocks

Rick Rule knows how to make money. He will never chase a loved stock like Nividea. Or a hot segment like Artificial Intelligence. He likes to keep it simple, and focus on what is hated like oil, gas and fossil fuels. Rick follows a simple Rule for Investment success:

Hated Stock = CHEAP stock = Make Money

Rick follows the macro. And from an investment perspective, he believes that hated carbon based fossil fuels are very attractive. And the operating margins of fossil fuels are high enough that the prices don’t have to stay up or down for the industry to be solvent.

Peak Demand for Fossil Fuels

Rick believes that peak demand for fossil fuels, particularly oil and gas, is likely to occur in 2060 or 2070. And peak demand for coal is likely to continue until nuclear power plants replace them to provide baseload. This is estimated to take at least 20 or 25 years.

And for this reason, Rick believes that “investments in fossil fuels are much better investments than the market believes them to be.” And assigning a terminal value to an asset, such as oil when the peak demand will occur in the future is counter intuitive.

And “It’s a mistake that’s driven by a narrative not by arithmetic or physics.” Let’s take a closer look.

Uranium is Hated and Hits All the Touch Points

Rick Rule is famous for his early investments in companies like Paladin Energy in the Uranium space. He loaded up and made a killing on uranium when it wasn’t on the radar for most investors. Rule is a Uranium expert and he believes that he doesn’t think “there’s anything that’s attractive as uranium was”.

“Uranium hit all my touch points it was hated, which I like. More importantly, it was an industry in liquidation. The selling price for the commodity was such that if the commodity price didn’t go up, the material would be unavailable. And the lights would go out around the world. There was an inevitability of that in uranium, which I don’t see anywhere else.”

Rule has already taken some profits from his Uranium investments as the market heats up and investors pile in. But it still touches the vital points for Rule’s investing strategy on being hated.

But that hate is slowly turning, as Investors (and the World) realise that Nuclear is the only way to create dispatchable, emission free energy.

Oil is Hated and “Amazing”

Rick Rule describes the oil and gas industry as “amazing”. Politicians are telling the oil and gas industry that their business will cease to exist in 2032. But Rule believes that this cannot happen, they won’t put them out of business.

All that is happening is they are constraining the supply of capital and destroying the popularity of a business that Rule believes will continue to be a very good business untill 2065 or 2070. Specifically, he states that “the oil and gas industry is under investing in sustaining capital to the tune of about a billion US dollars a day”.

This means that under investment today will constrains their ability to produce at today’s level two or three years from now. In other words, the politicians around the world “are paradoxically guaranteeing higher oil prices for a longer period of time”.

“What is amazing about the oil and gas industry in particular, however, is that it’s in such high political disfavor and such low popularity. Despite he fact that the industry is enjoying record high cash flows. Those cash flows are cheap and cheap in the market. And the industry is under investing in sustaining capital. “

The question for Rule is, which companies have sufficient sustaining capital to maintain their production two or three years out. So they can produce increasing volumes of oil and gas, as their competitors falter. Rule suggests Chevron and Exxon as an investment. They have both made recent acquisitions of other companies that produce oil and gas that will guarantee their success in this space.

And “Now, what’s missing with this strategy is simply the fact that oil is already priced at a great price. It doesn’t have to go up.”

Coal is Hated but “Truly Astonishing”

Rick is a “glutton for hatred” and he suggests like-minded individuals should look into the coal business. Coal “is so deeply out of faith” but it’s popular among consumers. Rick sees the difference between the price of coal mining assets and the ability and the amount of cash that they generate as “truly astonishing”.

Rick doesn’t believe the common narrative, that coal isn’t going to exist because it generates carbon. But he believes that countries like Germany, China and India have two choices – burn coal or have the lights go off. And any intervention from “that great energy physicist Greta Thunberg” cannot change those two choices.

It’s not unusual for Rick to have a few stats up his sleeve. And he says the world has invested over $5 trillion on alternative energy in the last 40 years. Some of that has been well spent, but much of it has been spent building solar capacity in Northern Europe where the sun doesn’t shine. And as a consequence of spending $5 trillion over 40 years we’ve reduced the market share of fossil fuels from 82% to 81%.

And Rick has a hot take, or a dose of reality for the carbon based believers that see no coal in the future.

“Yes, the markets expanded for both fossil fuels and for alternative energies. But how much money would it take to reduce the market share of fossil fuels meaningfully? And where’s that money going to come from? Me? It ain’t gonna happen. It just is not going to happen.”

Another great take from Rick, he really knows his stuff.

If you missed it, check out Rick Rule Uranium Expert Insights, on why the future of the Uranium Market is a “no brainer”.

Final Thoughts

Rick Rule has made his fortune loving what people hate. And when the current narrative is against fossil fuels, at some point the rubber will hit the road. That narrative will change when energy prices continue to escalate around the world. And then coal, gas, uranium and oil may become market darlings.

Following Rick Rule’s mode of operation, buy when hated, sell when loved. And count your cash looking for the next thing everyone hates.

Until next time,

M. Moneyman



Financial Failure to Financially Free

As a lifelong financial failure with a young family and deep in debt, I was made redundant 3 times in 2 years and in serious trouble. I had a “Financial Awakening”, I learned about personal finance and gained a financial education to accumulate 7 figures in assets.

My personal goal is to invest in myself, compound my knowledge and build wealth using three simple strategies. Save more money. Make more money. Learn about money. I’m living proof, that through the power of financial education, anyone can achieve financial independence. My sincere hope is that you will be able to learn from my journey and my blog.

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