This past Monday saw a big selloff in many stocks, including energy stocks. Most of this year, oil has looked like it was headed to $100 per barrel. However, Covid-19 has since messed with that trajectory.
OPEC+ had something to do with it as well. Recently, the group of oil-producing nations announced that it would start making more oil available. That will also lessen price pressures.
Then there’s the U.S. dollar. Because oil (and every other major commodity) is priced in dollars, it costs more to buy commodities when the dollar weakens. Basically, a weaker dollar means a rise in price. And today, the dollar is near multi-year lows.
Underlying all of this, though, are energy stocks which are also experiencing growing demand as the pandemic slows in most countries. True, Covid-19 is still a significant, market-moving force as we saw earlier this week. However, economic expansion in the United States, China and Europe still demands more energy.
So, with that, these energy stocks have the biggest upside at this point in time.
- Antero Resources (NYSE:AR)
- Matador Resources (NYSE:MTDR)
- SM Energy (NYSE:SM)
- Cimarex Energy (NYSE:XEC)
- Devon Energy (NYSE:DVN)
- Western Midstream Partners (NYSE:WES)
- Range Resources (NYSE:RRC)
Energy Stocks to Buy: Antero Resources (AR)
When unconventional drilling technologies burst onto the scene more than a decade ago, they opened up massive new opportunities for energy extraction in the Unites States. Basically, by fracturing (or fracking) hard shale layers, exploration and production (E&P) companies could access massive amounts of oil and natural gas.
First up on this list, AR stock is one of the E&P energy stocks. This company operates almost exclusively in the Marcellus Shale, a huge shale formation that runs from New York to West Virginia along the Appalachian Mountains. On top of this, Antero also has some operations in the Utica Shale, which runs through much of the same area.
AR stock has been performing well for the past one year, up 396%. Additionally, it’s up 144% year-to-date (YTD). All in all, this is a decent-sized company with a market capitalization of $4.1 billion. Currently, the stock has an “A” rating in my Portfolio Grader.
Matador Resources (MTDR)
Next up on this list of energy stocks is Matador. Sporting a market cap of $3.6 billion, this company has E&P operations as well as pipeline (midstream) operations — a combination that strengthens its business.
These two divisions are not only complementary, but they also act as a good hedge for each other. E&P (or upstream) operations usually outperform other energy stocks because, when demand hits, prices rise and upstream producers can make more money per barrel. When prices drop due to slackening demand, however, upstream operations are hurt. Meanwhile, midstream companies can still do well because they make money on the volume that goes through their pipes, not on the price of oil and gas.
Specifically, this company operates in the Delaware Basin in New Mexico and West Texas, as well as in the highly productive Eagle Ford Shale in South Texas. Finally, Matador also has some operations in the Cotton Valley and the Haynesville Shale in Louisiana.
Today, MTDR stock is up 154% YTD. The stock has an “A” rating in my Portfolio Grader.
Energy Stocks to Buy: SM Energy (SM)
It might not be a household name, but SM is actually one of the few energy stocks that goes back for more than 100 years. More specifically, SM Energy was founded in 1908. Headquartered in Denver, Colorado, it was known as the Saint Mary Land & Exploration Company up until 2010.
As you might have been able to tell from its old moniker, this is another E&P firm. Moreover, SM Energy has operations in both West and South Texas. If you’ve ever heard of WTI oil prices, that’s West Texas Intermediate, the quality and location for standard U.S. oil prices.
Not only are these locations resource rich, they’re also close to refineries and export facilities. Today, SM stock is up 203% YTD and has an “A” rating in my Portfolio Grader.
Cimarex Energy (XEC)
Another E&P name that started as an unconventional drilling company and became a game-changer in the energy sector is Cimarex Energy. Like others on this list, XEC operates primarily in Texas, Oklahoma and New Mexico. The majority of its production is also natural gas, which is unusual for most upstream energy stocks.
Of course, like oil production, natural gas operations are very much tied to the price of the commodity. However, oil prices tend to fluctuate a little more, since natural gas has more significant industrial and consumer demand. Plus, the U.S. has significant natural gas reserves.
On top of this, though, natural gas exports are increasing. That usually leads to a rise in domestic natural gas prices, which is good news for XEC stock. Today, the stock has a $6.5 billion market cap. It’s also been a strong performer, up almost 70% YTD. Currently, it has a “B” rating in my Portfolio Grader.
Energy Stocks to Buy: Devon Energy (DVN)
If you’re looking for a big, established E&P company that is a well-respected name among energy stocks, look no further than Devon Energy.
DVN has been around since 1971, which means it got through the oil embargo as well as a lot of economic ups and downs. Today, the company has a market cap of 17.1 billion.
This means it’s a sizable energy company. In fact, it’s one of the biggest independent E&P names out there. Of course, that size gives it stability, but it also lowers performance relative to smaller competitors. Currently, Devon operates in a number of basins in Texas, Oklahoma, North Dakota and the Rocky Mountains. It has significant proven oil reserves.
So far this year, DVN stock is up about 61% YTD and trades about 25% off its 52-week high. The stock has a “B” rating in my Portfolio Grader.
Western Midstream Partners (WES)
Next up is the only pipeline company on this list. Additionally, Western Midstream Partners offers something a bit different than other energy stocks here because it’s actually a limited partnership. What that means is, like a real estate investment trust (REIT), stockholders are direct owners of the company and are paid a piece of net revenue. That usually takes the form of a significant dividend.
In the case of WES stock, that’s a 6.44% dividend. Plus, since WES isn’t managing a business based on energy prices, it has a steady business model. After all, demand is less volatile than the prices themselves.
Moving forward, natural gas exports will help its pipelines as well as increasing oil demand as the economy expands. Plus, WES has a major integrated oil company partner for much of its pipeline. That makes for steady business, too.
Right now, WES stock is up 44% YTD, sporting a respectable $8.2 billion market cap. The stock has a “B” rating in my Portfolio Grader.
Energy Stocks to Buy: Range Resources (RRC)
Last up on this list of energy stocks is Range Resources. This E&P almost exclusively works on the natural gas (and natural gas liquids) side of the energy patch. Additionally, almost all its proven reserves are in the Marcellus Shale.
RRC has been operating for some 45 years. So, while it’s not a big player (it has a $3.7 billion market cap), it does know its way around the business. And that may be why most of Range’s energies are focused on natural gas.
What do I mean? Well, as the U.S. begins to export more natural gas, the bigger the profit margins will likely be. As such, this is one of those energy stocks with a big future as natural gas demand increases both domestically and internationally.
Today, RRC stock is up 124% YTD, slightly off its 52-week high. The stock has a “B” rating in my Portfolio Grader.
On the date of publication, Louis Navellier had a position in XEC. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article. The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
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