Forget Oil. Buy Steel Stocks Instead
As recent owners of oil stocks know, investing in the energy sector can be risky. Profitability is tied to the commodity price, and it takes a large amount of capital to continue to generate cash flow. If a company's debt level is too high when the commodity price drops, it can be in a precarious position, and the stock price will reflect that.
An investor can hedge that risk by diversifying in the sector to include refiners, midstream companies, and renewable energy producers, among others.
Another way for an investor to gain the benefits of oil when it is thriving (while still limiting the risk) is to invest in steel stocks. The steel industry supplies the pipe that transports oil and natural gas, as well as material for other equipment needed to drill and pump wells. And if the price of oil plummets, steelmakers can pivot their mills to produce other products where demand is higher.
Source Fool.com
