Shark Tank Investor Kevin O'Leary: Don't Overlook This Key Investment Sector

Millionaire Kevin O'Leary does not see signs of a recession for the US economy.

Kevin O'Leary, one of the Shark Tank investors, is confident that owning stocks in energy companies is "golden."

The millionaire told FOX Business host Larry Kudlow that the energy sector is booming and that investors should have bought stocks in oil and gas companies during the past 18 months.  

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"I love energy," he said during an appearance on the show "Kudlow" on Feb. 22. "Everybody hates energy. If you didn't own energy in the last 18 months, you miss the market. Go where people hate it. Energy is the driving pivot."

The oil and gas industry will continue to be profitable and generate free cash flow, O'Leary said. The energy sector rose by 59% in 2022 compared with the S&P 500 declining by nearly 20%. All the other sectors in the S&P fell last year.

Kudlow agreed with O'Leary's sentiment.

"I do not hate oil and gas," O'Leary said. "The cash flow, the distributions and health care. Wow. That sector is looking golden right now."

O'Leary also said he is a fan of investing in the healthcare sector, but did not provide details.

The U.S. economy will continue to grow despite some economists and analysts calling for a slowdown or a recession, he said.

"I still am optimistic on the economy, this incredible economy," O'Leary said. "And the best part – and this is the secret sauce, the juice that really makes it work – total gridlock in Washington. No more spending bills, impossible to get any policy done. And the market loves that." 

The shift of companies adopting a direct-to-consumer strategy during the global pandemic is also a boon because businesses were able to generate large profit margins.

"I'm optimistic for one reason, coming out of the pandemic, the entire S&P 500 went to a direct-to-consumer model," he said. "I don't care if you're Nike or anybody else. Margins went up pre-pandemic. Nike was at 9% of sales, direct consumer. Now they're over 30 on their way to 50, much higher margins."

The adoption of digitization by companies during the pandemic also benefited their margins.

"A lot of productivity came through the pandemic," O'Leary said. "A lot of digitization. A lot of adoption of digitization by seniors in the country that never used it before. You've got a whole economy running on a different model than you've ever seen."

He remains an optimist on the outlook of the economy.

"So, I'm a little optimistic that the reason that you should think optimistically about margins and free cash flow is many companies have figured this out," he said. "There's a new America 2.0, and I hate to be an optimist when I should be pessimistic, but I can't be," he said. 

O'Leary said he does not see signs of a recession in the U.S. despite the Federal Reserve continuing to hike interest rates.

"I've got 54 companies now that are private that are just killing it. We haven't seen the slowdown yet," he said. "Where is it? Everybody keeps telling me, recession, recession. Okay, show it to me."