The one constant with energy stocks, particularly as they relate to oil, is change. In early September, some analysts believed the rally in oil prices had reached their peak. Then Saudi Arabia and Russia announced they were capping production. War has broken out between Israel and Hamas. And recent data suggests that the long-expected recession in the United States may not happen.
All of this is bullish for crude oil. It now appears that $80 is the new floor for oil prices. Many industry insiders including Chevron (NYSE:CVX) chief executive officer (CEO) Michael Wirth now project $100 for a barrel of oil in the short term.
Fortunately, investors have many options to choose from when looking for energy stocks to buy. Many of these stocks have rallied sharply in the last few months but still offer investors plenty of upside and value. Here are three undervalued energy stocks that may not be getting the same attention as some of the larger names.
Halliburton (HAL)
Halliburton (NYSE:HAL) CEO Jeffrey Allen Miller is another oil executive predicting higher-for-longer oil prices. That’s been manifested in the 15.3% rise in HAL stock in the last three months. Even with that gain, the company’s stock is up 14% for the year.
Halliburton is an oil services company. This means the company supplies the equipment that the upstream companies will need to get oil out of the ground. Typically, this can be a cyclical business. But that hasn’t been the case with Halliburton. Despite the fluctuations in the oil market, the company has delivered virtually uninterrupted sequential and year-over-year revenue and earnings growth.
That performance is even more impressive when you consider that the overall rig count in the field is lower so far in 2023. This is showcasing the company’s use of digital innovation to generate more revenue per rig. In consumer terms, the company has pricing power.
The HAL stock chart may look like it’s becoming overbought. The stock recently broke above its 10- and 20-day simple moving averages. However, the company will be reporting earnings in late October. Another double beat accompanied by elevated guidance is likely to add fuel to the company’s stock price.
Devon Energy (DVN)
Devon Energy (NYSE:DVN) is an upstream oil company. Unlike Halliburton, 2023 has been a rough year for DVN stock which is down 15% for the year. Many oil companies have been performing much better.
On the one hand, it’s understandable. The company is heavily focused on U.S. production at a time when the oil industry is out of favor (to put it mildly) with the current administration. On the other hand, recent geopolitical events are serving as a reminder that we have to get oil from somewhere, and just a few short years ago, the United States was energy independent.
The question that investors need to ask themselves is whether DVN stock is cheap for a reason or overlooked among energy stocks. With a forward price-to-earnings (P/E) ratio of around 7x, it’s not unreasonable to vote on the latter.
DVN stock recently broke above its 50-day simple moving average (SMA) and is within 5% of crossing over its 200-day SMA.
TotalEnergies SE (TTE)
North America remains one of the key markets for oil production. However, the demand-supply imbalance in the oil sector is a global problem. That could have you looking for energy stocks with international exposure. That’s where you’ll find TotalEnergies SE (NYSE:TTE).
TotalEnergies is an integrated oil company that’s headquartered in France. And while it does have exposure to the North American market, the majority of the company’s operations are in Europe.
TTE stock presents investors with an interesting situation. Specifically, the company has had two consecutive quarters of lower year-over-year revenue and earnings. Still, the stock price has continued to go up.
But is it overbought? Maybe not. In September 2023 the company reaffirmed its commitment to pay out “at least 40%” of its cash flow from operations (CFFO) back to shareholders. This means more share buybacks and dividend payments.
And with a stock that’s trading at just 7x forward earnings and with a low debt-to-equity ratio of just 0.49%, there appears to be a long runway for TTE stock for investors considering which energy stocks to buy now.
On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
