If you could pick stocks to buy among the companies tied to the California Gold Rush, miners would not have been your best bets.
The miners were not guaranteed to get rich. While some of them did in spectacular fashion, many went completely broke.
One subset of those who flocked to the region actually did very well for themselves. They were the ones who ventured out not to look for gold but to sell supplies. It may not have been as exciting as digging for gold, but the profits were sure and steady.
Merchants made a fine living and built fortunes selling axes, pans and other items to the masses of gold hunters flocking to the region.
Business was so good that one firm in New York took to the region to sell tents, bedding and denim pants to the miners.
Indeed, young Levi Strauss experienced quite a run of success in this endeavor…
The same profit distribution has been true over the years in the oil and gas industry to some degree. Much like the Gold Rush, there are risks associated with the search for oil and gas exploration and production.
Although they cannot always escape the economic cycle of the industry, the company that sell supplies are not exposed to as much high-cost and risk as the exploration companies are. That's why many of these suppliers have managed to stay in the black, while the exploration and production companies have struggled for profits.
And it's why some of the best energy stocks to buy now are the supporting players in the continued exploration process.
Stocks to Buy: Drilling for Profits
Even during times when exploring for and producing oil and gas is not particularly profitable the industry still uses fluids, drill bits, and tubes every day. Activity goes on even when margins are tight and profits elusive.
This often leads to consistent profits for those selling to the industry during weak periods, and explosive gains when the oil market turns higher. We found two stocks to buy now that are great examples of this.