Should You Time the Energy Markets?

Should You Time the Energy Markets?


Warren Buffett and other successful investors hold fast to a basic core belief when it comes to investing in equities:

Never try to time the market.

At Stanwich Energy Advisors, we agree with Mr. Buffett’s advice, but supplement it with our own respectful addition:

Always try to time the commodities market!

This distinction is an important one. Energy is a commodity, not an equity, and we have found that you actually want to time the commodity market, as it can fluctuate dramatically based on supply and demand.

According to the efficient market theory, an asset's price fully reflects all available information. However, despite the increasing use of computers in all areas of investing, most decision making is still done by human beings, and is therefore subject to human error. Between these errors, seasonal weather patterns, and disruptive events like hurricanes and blizzards, the energy market has price dislocation that can be taken advantage of – If you know where to look. At Stanwich Energy, our business is predicated upon spotting these price anomalies.

Depending on your risk tolerance level, there are different strategies we can offer when purchasing energy in order to take advantage of the market. Keep in mind that the goal is not to buy at the absolute lowest price possible, but to secure favorable pricing within the context of all relevant data. Think of it as buying real estate at below replacement cost or buying real estate opportunistically knowing that your basis will protect your downside.

Essentially, we coach you to wait for a “pitch” that falls in your sweet spot. When it comes to energy procurement, nobody's going to call you out on strikes. Our goal is to wait for a pitch down the middle of the plate. When you buy energy, Stanwich makes sure that you only lock in when all the information, all the data, computes in your favor.