This year certainly started with a bang — or to be more precise, a boom. And that boom sent energy prices crazy.
Of course, things have already started to calm down. Oil prices are now again in the upper-$50 range, after hitting $70 a barrel briefly on the day after the U.S. took out the No. 2 guy in Iran.
Those prices certainly helped energy-dependent economies like Saudi Arabia and Russia. But it hasn’t lasted.
And the one thing that’s different this time around is that the U.S. is now a leading energy producer. This means U.S. operations can moderate whatever happens in OPEC crude.
As for how to invest … at Growth Investor, we identify the right buys using my stock-picking system, Portfolio Grader. And the four energy stocks below are top-rated Portfolio Grader U.S. energy picks that will be able to help energize your portfolio for years to come. These are all smaller plays that will benefit most from growing domestic energy demand.
Energy Stocks to Buy: PrimeEnergy Resources (PNRG)
PrimeEnergy Resources (NASDAQ:PNRG) is just shy of a $300 million market capitalization. It’s an exploration and production firm (E&P) with wells and properties in Texas, Oklahoma and West Virginia.
It looks for oil and natural gas. And 15 years ago, it got a nice $70 million boost from General Electric (NYSE:GE) to help fund a natural gas production partnership. That shows it’s a respected E&P by big firms.
And PNRG has been around since 1973, so it has accessed some prime real estate before other companies knew what was coming.
Also, it’s able to convert traditionally drilled wells to unconventional drilling, which means PNRG can also tap back into formerly productive properties without having to go look for new sites. Speaking of property, it has real estate in the Permian Basin as well as the Marcellus Shale, two of the top energy patches in the U.S.
The stock is up 85% in the past 12 months, yet its trailing price-to-earnings ratio remains near 32. It’s popular, but it’s not overvalued yet.
Hess Midstream (HESM)
This has been a popular way for larger oil companies to segment operations around the upstream, midstream and downstream aspects of their business. HESM is a midstream operation (think pipelines) that operates in North Dakota’s Bakken Shale.
Recently, it bought its sister firm Hess Infrastructure Partners for about $6.2 billion, locking down most of the pipeline operations in the Bakken.
Midstream players are great plays now because they don’t live or die by the price of oil. They make their money on demand, on the volume that flows through their pipes. And in an expanding economy, demand grows, so pipelines stay busy. In fact, pipelines are the primary way we’re playing the U.S. oil production boom here at Growth Investor.
This particular stock is up 26% in the past year, and it also delivers a 6.4% dividend, so if you invest here, do it for at least few years to take advantage of that juicy dividend.
Dorchester Minerals (DMLP)
Dorchester Minerals (NASDAQ:DMLP) is yet another interesting energy company that’s set up as a limited partnership. That means, for tax purposes, you’re treated like an owner and receive net income from the company, distributed in the form of dividends. This structure is similar to that of a real estate investment trust.
In DMLP’s case, it doesn’t do anything but own land that it leases out to energy companies. In return it gets royalties for the land and usually a percentage of whatever they dig up.
This is a great place to be, since there’s no equipment issues, little overhead and in good times, the value of the land increases, along with royalty payments.
What’s more, while the stock isn’t structured for pure growth, it is up nearly 25% in the past year, yet still has a trailing P/E of 12. Its dividend currently sits at 10.4%. And that’s after a strong year for the stock.
As long as oil prices stay healthy, you can expect that kind of solid performance.
NuStar Energy (NS)
NuStar Energy (NYSE:NS) is the biggest of the featured companies, with a market cap just over $3 billion. That’s hardly a monster in this sector, but it has operations around the country, focusing on pipelines, storage facilities and terminals.
Currently, it has nearly 10,000 miles of pipelines and 74 terminal and storage operations in the U.S., Canada and Mexico. About 2,000 miles of its pipelines are for anhydrous ammonia — water-free ammonia that’s used in fertilizer, cleaning products and drug manufacturing.
An expanding economy is good for midstream firms like NS. As demand for goods rises, production rises, and distribution and production of those goods require energy inputs like oil and natural gas.
And as the U.S. allows more energy exports, that’s even better news for NuStar, since it already has terminals and storage facilities at or near many key ports.
The stock is up 12% in the past year and delivers a 8.8% dividend. It’s a solid stock for the long haul, especially if you like a big income stream. And I’ve got more where that came from.
At Growth Investor, we don’t just invest in sectors, even ones as promising as oil; we invest in trends.
And one trend that’s just heating up is artificial intelligence (AI).
If AI sounds futuristic — you’re already using it every day! If you’ve ever used Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) Google Assistant or Apple’s (NASDAQ:AAPL) Siri … if you’ve had Netflix (NASDAQ:NFLX) recommend a movie or Zillow (NASDAQ:Z) recommend a house … even an email spam filter … then you’ve used artificial intelligence.
In this new world of AI everywhere, data becomes a hot commodity.
‘Data Is the New Oil’
As scientists find even more applications for artificial intelligence — from hospitals to retail to self-driving cars — it’s incredible to imagine how much data will be involved.
To create AI programs in the first place, tech companies must collect vast amounts of data on human decisions. Data is what powers every AI system. As one AI researcher from the University of South Florida puts it, “data is the new oil.”
So, as investors, if we want to buy the right stocks to ride the AI trend, all we have to do is look back at the oil boom of the 2000s.
Back in 2003, if investors believed that crude oil was set for a big price rise, they had a handful of different vehicles to choose from. They could buy speculative futures contracts … they could buy a small oil company exploring for oil in some remote jungle … or they could have bought shares in Core Laboratories (NYSE:CLB).
Core did no drilling or exploration of its own. It provided technology to the companies who did. As oil prices climbed from $30 per barrel in 2003 to $100 per barrel in 2008, Core’s customers had more money to spend on exploration. Core’s revenues surged … and CLB stock went from $5 per share to $60 per share … a gain in market value of 1,100%.
Now, picture an industry like Big Oil as a huge skyscraper with lots of offices. By buying stock in an individual oil company, it’s like having a key to one of those offices. By buying Core Laboratories, it’s like having a “Master Key” to all of them.
The AI ‘Master Key’
Core Laboratories was the Master Key to the 2000s oil boom. And here, the Master Key is the company that makes the “brain” that all AI software needs to function, spot patterns and interpret data.
It’s known as the “Volta Chip” — and it’s what makes the AI revolution possible.
You don’t need to be an AI expert to take part. I’ll tell you everything you need to know, as well as my buy recommendation, in my special report for Growth Investor, The A.I. Master Key. The stock is still under my buy limit price — so you’ll want to sign up now. That way, you can get in while you can still do so cheaply.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.