Long-Term Plays

As the price of gasoline continues to increase it will lead consumers and manufacturers to consider alternatives. Two alternatives that are already in limited production are electric and natural gas vehicles.

Electric vehicles are in the early stages and, as technology develops, it will help increase production as well as the practicality of such vehicles. From an investment viewpoint I think the best way to play the expansion of electric vehicles is through the lithium-ion batteries used in most of the new cars.

The Global X Lithium ETF invests about half of its assets in lithium miners and the other half in the battery makers. Both will benefit from an increased demand for electric cars.

Natural gas cars may never be the most common vehicles in the U.S., but if you walk around major cities, such as New York, you’ll see natural-gas-powered buses everywhere.

To play the potential boom in more natural gas vehicles, my suggestion is the First Trust ISE-Revere Natural Gas ETF (NYSEArca: FCG). It holds a basket of natural-gas-related stocks. Investors often forget that the U.S. is referred to as the “Saudi Arabia of Natural Gas,” and FCG is likely to perform well as demand for gas ramps up in the coming years.

The Hedge

The worry for most Americans is that higher gas prices will lead to a decrease in their net worth.

It’s a reasonable concern, but owning some of the securities I’ve discussed could be a way to hedge higher gasoline prices. If gasoline indeed continues higher, your expenses will increase, but so will your investments in the ETFs mentioned. This is a perfect $6 gasoline hedge.

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