Many investors are focused on bottom fishing the high flying stocks that got them this far. But that is not going to help right now. Buying quality energy stocks will.
Even before Russia invaded Ukraine, energy prices were rising because the pandemic lockdowns were finally lifting around the world. This meant people were back at work and consumers were once again demanding more goods.
Also, Europe and the U.S. passed $1 trillion-plus infrastructure stimulus plans, plus other massive stimulus to get through the pandemic. All this new stimulus hit energy prices, as well as other industrial commodities, hard and fast.
There is little doubt that Putin has been playing the long game when it came to his current desires. He joined the Organization of the Petroleum Exporting Countries (OPEC) in 2016 and has since been trying to act as a wedge to OPEC’s historic support for the West. Now, we see the consequences of his efforts.
But the U.S. and the West have options. And these stocks provide some of those solutions.
Here are the best stable energy stocks to buy now:
- Antero Resources (NYSE:AR)
- Canadian Natural Resources (NYSE:CNQ)
- ConocoPhillips (NYSE:COP)
- EOG Resources (NYSE:EOG)
- Ecopetrol (NYSE:EC)
- Equinor (NYSE:EQNR)
- Marathon Oil (NYSE:MRO)
Stable Energy Stocks: Antero Resources (AR)
It is not just oil prices that are a challenge right now. It is also natural gas and derivates like propane that are called natural gas liquids (NGLs). They are specific derivatives of natural gas, like the derivatives that come from refining crude oil.
Antero Resources is the second largest producer of NGLs in the U.S. And what isn’t getting snapped up at home is certainly destined to Europe, which relies heavily on Russia for its natural gas and NGLs.
With the cancellation of the Nord 2 pipeline by Germany, it means NGLs will be in greater demand in the long-term. Growing export access for domestic liquified natural gas (LNG) companies means there will be expanding long-term demand from Europe. That is all good news for energy stocks like AR.
AR stock has gained nearly 150% in the past 12 months, including 41% year-to-date (YTD). With an $8 billion market capitalization (market cap), it is just hitting many brokerage services research lists and is growing rapidly.
This stock has an “A” rating in my Portfolio Grader.
Canadian Natural Resources (CNQ)
This Canada-based integrated oil and natural gas company has been around since the early 1970s. It has operations in Canada, particularly in the oil sands, as well as pipeline (midstream) operations and exploration and production operations in North America. It also has onshore and offshore operations in Europe and Africa.
CNQ has an almost $68 billion market cap, but not a great deal of U.S. investors hear much about this integrated player, since the U.S. has some big names we see more frequently. But that doesn’t make it a lesser company. It has been operating a long time and is highly diversified in its resource mix, as well as its geographical operations.
The stock has been going gangbusters for the past 12 months — it has gained 72%. YTD, it is up 31%. But it is still trading at a price-to-earnings (PE) ratio of just 11 and has a 3.8% dividend.
This stock has an “A” rating in my Portfolio Grader.
ConocoPhillips (COP)
With a market cap of $122.1 billion, ConocoPhillips is one of the larger U.S.-based integrated oil energy stocks. It has operations in more than 15 countries and splits its production almost equally between oil and natural gas.
This is a great time for integrated oils since their upstream operations can run at full tilt, as can their midstream and downstream (refining, marketing, retail) operations. And all this can be done with improving operating margins since their costs are fixed, yet prices and volume continue to rise.
Unsurprisingly, COP stock has risen 65% in the past 12 months and 30% YTD. That is a significant move for such a big company. Yet, COP still has a PE ratio of 15.4 and dividend of 1.44%.
This stock has an “A” rating in my Portfolio Grader.
EOG Resources (EOG)
Remember Enron? EOG Resources was spun off from that disaster in 1999. Today, it is one of the largest earnings and profits (E&P) firms in the U.S., with a market cap of $65.9 billion.
E&P firms are the most leveraged way to play the rise in oil prices since they have built in a fixed price for production. So, if it costs $35 a barrel to get oil out of the ground and oil prices are $40, an E&P makes $5 on each barrel. But if oil prices hit $100, that is $65 per barrel. Then multiply that by the amount of barrels per day and per week. You get the picture.
Plus, a firm with EOG’s size can boost output in more significant ways than smaller producers. If the government wants E&P to drill for more oil and natural gas, EOG can quickly oblige.
EOG stock has gained nearly 80% in the past 12 months and 26% YTD, yet it trades at a PE ratio of 14 and distributes a 2.5% dividend.
This stock has an “A” rating in my Portfolio Grader.
Ecopetrol (EC)
One thing that seems certain is the fact that OPEC isn’t in a place to begin releasing significantly more oil into the markets, given Russia’s membership in the group.
That means Europe, the U.S., and others need to look to more reliable sources to amp up production. One of those sources is South America. The U.S. is already in talks with Venezuela about selling in the U.S. again.
Another opportunity is to work next door in Colombia, where EC is headquartered. EC is one of the bigger energy stocks in South America and because it is integrated, it can ship either raw crude or refined products to the U.S., as well as supply its local demand.
EC stock has gained 25.8% YTD. Its PE ratio is 7.5. It may well have a bright future ahead in both the short- and long-term.
This stock has an “A” rating in my Portfolio Grader.
Equinor ASA (EQNR)
As the West looks to new energy sources, EQNR is one option that is right in Europe. With a $101 billion market cap, this is a sizable integrated oil company that has operations offshore in Norway, as well as operations in the U.S.
Given its two main locations, it will be able to reap the opportunities of rising production incentives in both Europe and the U.S. And now that oil and natural gas from Russia is likely offline in Europe for some time to come, EQNR will be part of a longer-term solution for the continent, as well.
EQNR stock has risen 52% in the past 12 months and 19.9% YTD. Its PE ratio is 12 and it maintains a 1.95% dividend, even after its strong performance.
This stock has an “A” rating in my Portfolio Grader.
Marathon Oil (MRO)
Marathon Oil is the E&P spinoff of Marathon Petroleum (NYSE:MPC), which is the downstream company that refines, markets and retails Marathon Oil output.
Launched in 1887, the company was bought by John D. Rockefeller in 1889 and woven into his Standard Oil Company. Since then, the company has changed hands under the Marathon name for decades. It wasn’t until 2001 that the current iteration of the company took shape. In the intervening years, MRO has sold off most of its far-flung enterprises and now focuses on U.S.-derived oil and gas production.
This is a great place to be right now. It is relatively small, carrying a market cap of $15.6 billion. But it is focused and has some of the best properties in the country. It will surely benefit as the U.S. looks for more energy independence.
MRO stock is up 83% in the past 12 months and 29.2% YTD. But it is still trading with a PE ratio below 20, currently sitting at 17.7. And earnings should keep pouring in.
This stock has an “A” rating in my Portfolio Grader.
— Louis Navellier and the InvestorPlace Research Staff
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Source: Investor Place