After nearly months of conflict, the Russia/Ukraine war is clearly one of the energy sector’s biggest challenges. Moreover, the oil production cuts declared by OPEC+ further limited supply, boosting demand and prices. In addition, with outflow cuts and scarcity, we’re finding plenty of attractive opportunities with plenty of energy stocks to buy.
Perhaps the main concern for investors in energy stocks is the Federal Reserve’s monetary tightening efforts. The bank is committed to tackling the rampant inflation rates by raising benchmark interest rates. Moreover, the continued bumps in interest rates will likely impact the demand for energy resources and related commodities. The pandemic pushed oil prices into negative territory for the first time, forcing energy producers to cut back on spending. Moreover, the subsequent deleveraging allowed energy firms to benefit from the rising oil price environment.
| LNG | Cheniere Energy | $173.08 |
| SWN | Southwestern Energy | $7.16 |
| ENPH | Enphase Energy | $319.42 |
| SMR | NuScale Power | $11.22 |
| COP | ConocoPhillips | $126.81 |
| VLO | Valero Energy | $138.40 |
| CVX | Chevron Corp. | $183.70 |
Energy Stocks to Buy: Cheniere Energy (LNG)
One of the top energy stocks to buy is Cheniere Energy (NYSEAMERICAN:LNG), a Houston, Texas-based energy giant occupying a powerful position in the natural gas sector. Europe and Asia are hungry for increased access to natural gas, creating opportunities for Cheniere’s long-term growth potential. The company’s long-term partnership with China’s leading LNG producer, CNOOC Limited, provides an additional growth avenue through which Cheniere’s assets can be utilized.
In addition, its unique geographical positioning puts Cheniere closer to potential buyers in Europe and Asia than its competitors across the globe. Plus, it can take advantage of this secular story shaping up for natural gas production. Even better, its stock trades roughly 21% lower than its 5-year average while offering double-digit returns. Hence, it’s one of the best bets in the energy space for long-term stability.
Energy Stocks to Buy: Southwestern Energy (SWN)
Another one of the top energy stocks to buy is Southwestern Energy (NYSE:SWN), a natural gas exploration and production company headquartered in Texas. The firm will also benefit from the current push for non-Russian sources of hydrocarbons, with the demand for natural gas expected to surge in the coming years.
In addition, earning results over the past few quarters have been stellar, with revenues surging by triple-digit margins. For example, in its most recent quarter, its revenues shot up 183.8% to $4.5 billion. Also, its gross profit and EBITDA margins have also increased by double-digit margins in the past year. Moreover, another positive for the firm is that 60% of its portfolio is hedged, which effectively protects it from natural gas’s downward pricing volatility. As such, investors should consider SWN as one of the energy stocks to buy for the long haul if they seek value and strong shareholder performance.
Energy Stocks to Buy: Enphase Energy (ENPH)
Between rising energy prices and grid reliability concerns, switching from conventional electricity sources to more emissions-free alternatives can be challenging. Fortunately, such problems have become the core focus of Enphase Energy (NASDAQ:ENPH). Founded in 2006 and headquartered in Fremont, California, this innovative energy technology business has spent the last decade pioneering a suite of products that are helping to make renewable energy simpler and more accessible than ever before.
In addition, from its robust line of solar micro-inverters to its reliable battery energy storage solutions, the firm has only grown in popularity since inception. Operating results for the firm have been stupendous, to say the least. In the past five years, its sales have grown at over 43% on average with rapid growth in free cash flow margins. Overall the business is likely to grow at similar rates for the foreseeable future on the back of tailwinds towards green energy and solar in particular.
NuScale Power (SMR)
NuScale Power (NYSE:SMR) is another one of the top energy stocks to buy and is pushing the boundaries of nuclear energy. By harnessing the power of small modular reactors, they are revolutionizing the industry’s capacity to deliver safe, reliable energy. Unlike traditional atomic plants, these facilities can be built almost anywhere around the globe without fear of compromising safety standards.
Furthermore, their smaller physical footprint means these SMRs can integrate more easily into existing infrastructure. This could equate to a seismic shift in our power grid. It could also highlight NuScale’s game-changing potential ability to deliver nuclear energy. According to the International Atomic Energy Agency (IAEA), nuclear energy could contribute a sizeable 14% of global electricity by 2050, up from 10%. Firms like NuScale offer a novel product in the sphere and should benefit immensely from its first-movers advantage.
ConocoPhillips (COP)
ConocoPhillips (NYSE:COP) is a global leader in the oil exploration and production industry. It has operations spanning 13 countries and total assets which exceed $93 billion. This forward-thinking organization has also been generous in rewarding shareholders through dividend returns; over the past five years, offering more than 30% of profits to investors.
The firm has consistently performed in the oil and gas space, with 2022 being one of its best years to date. Oil and gas prices surged to new heights this year, which resulted in a gusher of cash flows for the company. In addition, it also delivered $4.7 billion in free cash flows in its third quarter, for another comfortable earnings beat. Moreover, it boosted its quarterly dividend by a hefty 11% and bumped its existing buyback program by $20 billion. With the robustness in energy markets likely to persist for the foreseeable future, I expect COP stock to continue delivering the goods for its investors.
Valero Energy (VLO)
Valero Energy (NYSE:VLO) is an American company heavily involved in the oil industry. It’s one of the top leaders in the global energy sector with a well-diversified refinery base throughout Canada, the U.K., and the U.S.
In addition, the firm has been booming over the past few months due to fundamental factors that have seen refining margins surge. With no new refineries coming online, existing infrastructures are more heavily relied upon to meet the increasing consumer demand, and Valero is taking full advantage of those circumstances. Valero can also operate at a much higher rate than normal through enough capacity to handle this strong demand, delivering more output and earning increased profit as prices hit new heights. This is great news for investors, who are reaping the benefits of a sturdy company with admirable performance.
Chevron (CVX)
Chevron (NYSE:CVX) more commonly known as CVX, has been a player in the energy industry since the late 19th century. At the moment, Chevron operates in hydrocarbon exploration, storage, transportation, refining, and marketing products related to energy conservation. In addition, the company’s ability to manage the early adaptation phases of the transition from traditional oil sources is reflected in its strong balance sheets and healthy liquidity ratios. Also, its debt-to-equity ratio is at just 0.15, significantly better than the industry average. Moreover, CVX is a dividend king, growing its payouts for 35 consecutive years.
On the date of publication, Muslim Farooque held a LONG position in Solana and Ethereum. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines