On January 28, I argued that the U.S. economy is still in the early recovery stage of the business cycle, and that you should overweight your portfolio toward the stocks that do best at this point in the cycle: “Sectors that do best are usually industrials, near the beginning of the stage; basic materials; and, near the end, energy.”

 The next stage for the U.S. economy is late recovery. “Sectors that have done well in this stage include energy and, near the end of the stage, consumer staples and services.” (For more on investing for the economic cycle see my post http://jubakpicks.com/2011/01/28/where-the-heck-are-we-in-the-economic-cycle-anyway-the-answer-is-important-in-deciding-what-sectors-to-overweight/ )

See any sector that those two stages have in common? So why not overweight energy right now? several readers asked. That way your portfolio can catch the sector’s outperformance at the end of the early recovery stage and the sector’s outperformance in the first part of the late recovery stage.

That’s an excellent idea. Just be careful what energy stock you pick. The sector is a little tricky to navigate right now. I’d favor being very selective on oil stocks—most of the international majors aren’t all that attractive currently. I’d favor oil equipment and service companies right now and small oil producers that are growing production and that look like acquisition candidates over the oil majors.

And I’m going to end this post with five picks of exactly those sorts. Read more

ExxonMobil buys U.S. natural gas for $31 billion–I told you this was a big trend

ExxonMobil (XOM) will buy XTO Energy (XTO) for $31 billion in stock. (ExxonMobil will also assume $10 billion in XTO Energy debt.)

This acquisition is just the latest example of a shift among the international energy majors from exploration and development for oil in risky new geologies and tough climates to a concentration on predictable, low-production cost assets such as onshore U.S. reserves of natural gas locked up in shale formations such as the Barnett shale formation of Texas.

I flagged that trend for you in two posts earlier this month. You’ll find links to those columns later in this post. Read more