Today is another ugly day in the energy sector as investors are taking more profits. I am going to continue to buy Cabot Oil & Gas COG, especially on this 2.5% decline in the shares today. I will buy 100 shares at around $63; COG will be 3.2% of the fund.
Let's step back for a minute and try to assess what is going on in the commodity markets. Natural gas typically sells off from June to July on a seasonal basis, and this year is no different given the recent pullback from the highs of $13.31 (current prices are $12.80). I think this correction may continue further -- we may even test the $12 level in the short term -- but the story on commodities hasn't changed in terms of strong demand and limited supply growth.
China accounted for 95% of the demand for copper last year, and I expect this trend will not change anytime soon, unless the central bank of China begins raising rates dramatically, which isn't expected. The commodity story is truly about global demand growth -- especially China and India -- and not what happens in the U.S. And as supplies remain tight, this will continue to mean higher prices for oil, natural gas, copper, molybdenum (the product that goes into making copper harder, stronger and shinier) and other commodities. But these commodities won't go straight up. And there will be days and possibly weeks that the stocks will fall, but that is the long-term opportunity. That is why I am buying more COG today. And that is why I will buy El Paso (EP) , Southwestern Energy (SWN) , Devon (DVN) , National Oilwell Varco (NOV) and XTO Energy (XTO) when my restrictions are lifted. I will take advantage of the weakness in the stocks because I am a long-term bull on global growth.
I have carefully balanced my fund to own enough energy, materials and industrials and complement these holdings with consumer durables, health care and technology. I will continue to use this balanced approach, because it helps to protect me on the down days in the commodity markets and gives me exposure to early-cycle and defensive groups. My favorite names in these sectors are McDonald's (MCD) , which I will buy more at $57; Wal-Mart (WMT) , which is also a buy at $57; Abbott Labs (ABT) ; Altria (MO) ; and Morgan Stanley (MS) .
Regards,
Jim Cramer
DISCLOSURE: At the time of publication, Cramer was long COG, EP, SWN, DVN, NOV, XTO, MCD, WMT, ABT, MO and MS.
Send email to james.cramer@thestreet.com.