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Gas Prices Headed Below $3! How to Invest When Consumers Win


Less than a month ago Stifel's David Lutz told Breakout he thought gas prices could easily fall below $3 a gallon by the end of the year. Since then prices have dropped by more than 5% to below $3.20 a gallon for the first time since early 2011. Lutz isn't taking a victory lap just yet but he's looking pretty good in terms of direction.

The savings matter. In 2011, with gas prices over $3.50 per gallon, the average household laid out more than $4,000 per year for gasoline. Those families could find an extra $10 a week in their pockets heading into the holidays if Lutz is right. That's money that can be saved for school or investments. This being America it's also more than enough to buy a delicacy such as Ruby Tuesday's (RT) Pretzel Bacon Burger, 1,626 calories of gluttonous perfection (pricing available at selection locations).

Lutz says the the glut of oil coming out of North Dakota and the fall in the price of Ethanol credits he discussed last month are still in place. That leaves him optimistic that gas prices will continue falling, giving a boost to consumers to help offset the vagaries of Obamacare and random government shutdowns.

He still likes the Select Sector Consumer Discretionary SPDR (XLY) as a way to play but he's really got an eye on those burgers and other casual dining spots he refers to as the "ground zero" of his investing thesis. For the families outside major metropolitan areas, the amount of money being spent on gasoline can be orders of magnitude higher than the $4,000 a year average. In households with more than one commuter, the boost to disposable income is huge.

"They're going to be more apt to take their family out to dinner," reasons Lutz. He's watching the momentum in stocks like Cheesecake Factory (CAKE) and Red Robin Gourmet Burgers (RRGB) to keep driving shares higher as gas prices fall.

Treat yourself, America. You've earned it.

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