With a new war raging, some of the hottest energy stocks are in oil. For one, if the latest war begins to spread beyond Israel and the Palestinians, oil prices could push even higher. For example, if Israel finds that Iran was behind the attack and launched retaliation, the Strait of Hormuz could be jeopardized.
In fact, as noted by MarketWatch, “Iran remains a very big wild card and we will be watching how strongly [Israeli] Prime Minister Netanyahu blames Tehran for facilitating these attacks by providing Hamas with weapons and logistical support,” said Helima Croft, head of global commodity strategy at RBC Capital Markets.
Further, there are calls for U.S. sanctions against Iran with the latest situation — which could tighten Iranian oil exports. Lastly, the U.S. is dealing with tight oil supplies. That being said, investors may want to go long on energy stocks.
Energy Stocks: Exxon Mobil (XOM)
After diving from about $120 to $106, Exxon Mobil (NYSE:XOM) is just starting to pivot higher. In fact, from its current price of $110.92, I’d like to see XOM initially refill its bearish gap at $116. Helping, analysts have been raising their price targets. TD Cowen, for example, raised its target to $110 from $107. Bank of America raised its target to $150 from $145. We also have to consider that potential U.S. sanctions on Iranian crude exports could jolt the market, too.
Outside of the war, Exxon just said oil prices could boost its upstream earnings by $900 million to $1.3 billion in the third quarter. It also expects to see operating profits of between $8.3 billion and $ 11.4 billion, as compared to expectations for $9.2 billion. We also have to consider OPEC wants to stabilize crude around $90 a barrel – which should bode well for XOM as well.
XOM also carries a dividend yield of 3.3% at the moment. In September, XOM paid out a 91-cent dividend. We should see a similar payout again soon.
Devon Energy (DVN)
Another wildly oversold oil stock just starting to rebound is Devon Energy (NYSE:DVN). After plunging from $52.50 to $42.50, DVN caught strong double-bottom support and is starting to move higher. Last trading at $46.10, I’d like to see DVN again challenge $52.50 initially.
Bank of America just raised its price target on DVN to $58 from $54. Even Mizuho just raised its target price to $60 from $62. Also, with strong profits and capital returns, Devon Energy is severely undervalued, as compared to its competition. Better, DVN currently yields 10.85%.
SPDR S&P Oil & Gas Exploration & Production ETF (XOP)
If you’d rather diversify – at less cost – there are ETFs such as the SPDR S&P Oil & Gas Exploration & Production ETF (NYSEARCA:XOP). With an expense ratio of 0.35%, the ETF provides exposure to the oil and gas exploration and production segment of the market. At the moment, some of its key holdings include Callon Petroleum (NYSE:CPE), SM Energy Company (NYSE:SM), Devon Energy, EOG Resources (NYSE:EOG), and ConocoPhillips (NYSE:COP).
After dropping from about $152.50 to $135, the XOP ETF caught strong support and is just starting to pivot higher. Last trading at $145.24, I’d like to see it again challenge overhead resistance around $152.50. Of course, that also depends on what happens in the latest war.
On the date of publication, Ian Cooper did not hold (either directly or indirectly) any positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
