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When I set out to research and write my recent Special Report Five Sector Facing Disruption That Could Crush Your Portfolio I wanted to focus on the “destruction” side of the process of “creative destruction” that makes up economic growth in our capitalist system. The “destruction” side gets relatively less attention than the “creative” until something goes massively wrong. I’m convinced that its quite possible to pick up on destructive trends relatively early, that is before the big damage is done. With U.S. stock markets near historic highs, the value of pickup up on downside trends before they really bite a portfolio seemed obvious to me.

But as I got further and further into this Special Report I began to question the value of rigidly separating the destructive and creative sides of the growth process. Since “destruction” leads into “creation,” the next winners will emerge from that “destruction.” And any attempt to define the causes and limits and direction of that destruction will also point to the winners that will emerge in the “creation” part of the cycle.Writing only about “destruction” risked leaving a lot of “creation” profits on the cutting room floor (as it were.)

Hence I’ve added a Bonus Special Report on 5 Profit Winners from Disrupted Sectors on my subscription site. In this Bonus Report, I’ve shared with subscribers the names of some of the winners on the creation side that have emerged as I did my destruction research. I think I may wind up with more than 5 winners. If that’s the case, I hope you won’t mind if I share those “extra” stock picks with you.

And now, without more ado, let me give you my first Profit Winner from Disrupted Sectors–Parley Energy (PE) from the disruption in the oil sector, my #2 disrupted sector in my Special Report on

I made oil my second disrupted sector in my Special Report after arguing that the putting together Chevron’s (CVX) buy of Anadarko Petroleum (APC) for $33 billion and Norway’s ever more likely decision to leave a potential $65 billion in oil in the ground off the Lofoten Islands gave me  a picture of an oil sector that isn’t sure how to model the returns on longer term investments. What if more investment managers decide to divest their fossil fuel stocks as Norway has done? Then stock prices–and return on investment–will fall even with the discovery of more oil. And this divestment would raise the cost of capital for oil companies making any long-term exploration and development projects more costly. And if more countries decide that they need to require oil companies to leave more oil in the ground, then returns on long-lived projects will plunge. Along the way to outlining the potential for disruptive in the oil sector I also argued that in this environment of uncertainty, investments in production from oil shales is obviously relatively attractive–hence the Chevron purchase of Anadarko with its 10,000 horizontal drilling locations in the Permian Basin. These assets are by nature more short-lived than, say, a deep water asset. It’s relatively quick to increase the rate of production from these oil shale assets if a company needs to beat a deadline imposed by efforts to fight global warming. And it’s relatively easy to temporarily pause production in oil shale fields. An investment in oil shale, as opposed to an investment in drilling off the U.S. coast, for example, is relatively less uncertain and less open to disruption.So out of this disruption–in spite of it or actually even because of it–some oil shale stocks will be likely winners.I looking at what stocks popped after the Chevron bid for Anadarko, I noticed an interesting two-tier phenomenon. The stocks of almost all the companies that might be reasonable “next” buys moved up 4% to 8% on the news. (Anadarko shares moved up 32.5% on the news that first day.) But the shares of a few companies showed gains that far exceeded that. Pioneer Natural Resources (PXD) was up 11.53%. That made sense to me because I think Pioneer is the best of the Permian Basin oil shale pure plays. (And that move made me glad that I hadn’t sold Pioneer out of my long-term 50 Stocks even though I’d named it as one of the 10 Most Dangerous Stocks for this earnings season. (I’d said that Pioneer stood a good chance of missing earnings when it reports on May 6 but that I’d hold through that event and buy more on any plunge. That’s in contrast to Diamondback Energy (FANG) that I also named as a stock in danger of plunging when it reported earnings on May 7. In that case, however, I sold the shares out of my 12-18 month Jubak Picks Portfolio. Diamondback was up 6.37% on the Chevron/Anadarko news. Ouch, of course. But at least it wasn’t 11%.)

What intrigued me about the top tier of gainers wasn’t Pioneer, however. But Parsley Energy (PE), a smaller Permian play. This stock too was up more than 11% on the day.Some reasons for that performance are pretty clear I think. While Anadarko has 240,000 acres under lease in the Delaware Basin of the Permian–and a market cap of $31 billioin–Parsley has 192,000 acres under lease in the Delaware and Midland Basins of the Permian–and a market cap of just $6.4 billion. That’s a lot of oil sand acreage for a very reasonable price.And these are really good acres for oil production. Parsley reported that its total proved reserves climbed by 25% in 2018 from 2017.

But what intrigued me as I dug into Parsley wasn’t its oil position but its water assets. Water is critical to oil shale production since it is a key ingredient in the slurry that gets pumped down the wells in the fracking process that allows producers t recover the oil locked in these shale formations. And disposing of the waste water that comes out of these wells is an increasing problem in the dry Permian Basin. The waste water that results is highly toxic. It has to be injected into really deep wells where it will not pollute drinking water and water needed for farming and industrial processes (such as fracking.) Or it needs to be treated to remove the chemicals used in fracking. And that is expensive and requires access to water reclamation infrastructure.One of the big worries in the Permian Basin is whether the oil shale producers are about to run out of water and/or about to see costs rise dramatically as more and more waste water needs to be treated for reclamation and reuse.

What’s different about Parsley that stood out very starkly as I read through its quarterly reports, conference calls, and presentations is that the company has excess water supplies and substantial water treatment infrastructure. The company has invested $150 million in water infrastructure. And in its recent investor presentations the company has said not only that it has enough water for its needs, but that one of its goals is to figure out a way to monetize its water assets by selling water to third parties.And in efficiencies that have let the company move up the schedule for reaching positive free cash flow to the fourth quarter of 2019 from the first half of 2020, and Parsley Energy looks like a winner from disruption in the oil sector–at least in the short run.The company reports earnings next on May 1.

As of tomorrow, April 17, I’ll be adding Parsley Energy to my Jubak Picks Portfolio. The stock closed today at $20.45. It’s price range over the last 52 weeks stretches from $14.17 to $33.43. I’m setting a target price of $31 in my Jubak Picks Portfolio.