The following appeared in a letter from a firm providing investment advice to a client."Homes in the northeastern United States, where winters are typically cold, have traditionally used oil as their major fuel for heating. Last year that region experienc

The author of the argument recommends to invest into a company whose main specialization is selling heating oil. Their recommendation is based on two facts: recently increased number of households and weather forecasts predicted an increased number of cold days during following winters. While the recommendation may seem reasonable, a number of questions must be answered in order to be sure that it has been grounded properly.

Firstly, there is not enough factual data about the current levels of heating oil consumption in the region, so it is needed to provide potential investors with such data supported be the information about the number of households, their preferences in heating technologies, materials and fuel. It would also be plausible to know about the changes in this market during recent years, which could help to identify trends and the the whole range of possibilities for investments. If the growths of the market is supported by facts, the recommendation would look more informative.

Secondly, relying on weather forecasts may seem a bit too naive, because the climate may change unpredictably, so stronger evidences should be provided instead. For instance, the author mentioned the number of cold days during one winter without mentioning any real temperatures and market state during the coldest days. Moreover, twenty days long period mentioned in the argument may be too short to be regarded as an evidence of stable income during the whole year, so the author should provide the clients with more details about company business. For example, they could have mentioned other fuels types sold by the company and other sources of income, because it might be possible that their business model let the company grow thanks to other activities not limited by selling heating oil in winter. It even should be done despite that providing more details about the company business would possibly weaken the advice, but it would help to make right investing decisions.

Thirdly, recent advancements in civil construction may not be a sign of growing demand for heating oil, because, for example, new houses may be designed to be heated using other sources of energy like electricity or solar power, or the total number of household may be decreasing, so instead analyzing civil construction data separately, demographic analysis must be conducted too. If the new houses are going to be heated by oil and the number of households is going to grow, the interest of investors will be higher, but in the contrary case mentioning this fact must be considered irrelevant to the advice.

Finally, investors are mostly interested in predictable income, so they need more proofs that the company's market-share and total revenue will be growing within observable future. Since oil is a non-renewable resource whose prices are also affected by politics, there is a chance of instability caused by such circumstances like lack of supply caused by natural circumstances or, for example, war. These issues have to by analyzed carefully, and all traceable risks have to be mentioned and calculated. Mentioning such information would help investors to be sure that everything has been taken into consideration, because only observed things can be controlled.

To sum up, while the advice is based on certain data, it requires more facts and details in order to be considered seriously. This includes more factual data like the number of houses, market distribution, market changes, risks etc.