Are These The Best Energy Stocks To Buy For The Rest Of 2020
It has been a roller coaster year for the stock market, energy stocks have been some of the hardest hit. They crashed as hard as any other sector during the stock market crash in March. However, they are not like some of the top retail stocks which actually recovered and reached new highs. The top energy stocks crashed and weren’t able to find a strong footing. Certainly, Saudi Arabia’s decision to start a price war didn’t help. It was like fuel on the fire in a sector that was already in the doldrums. This led investors to keep questioning, “will oil stocks ever recover”? If you happen to have some oil stocks in your portfolio, you might have felt the same.
Granted, crude oil starts to rebound and energy stocks are exhibiting some bullish signals. But the question here is, is it too early to jump in? The Energy Select Sector SPDR Fund (XLE Stock Report) is up 6% since October, though remains down around 50% year-to-date. Put simply, the sector is easily the worst performer this year. Nevertheless, many experts believe that this could be a good time to look for top energy stocks to buy. This came as energy stocks have moved higher in recent weeks, as some of the top tech stocks have struggled. But not all shared the same view. Chad Morganlander, portfolio manager at Washington Crossing Advisors, is also taking a cautious approach when dealing with energy stocks.
“We’re still underweight the sector, but if you look beyond, say for example, nine to 12 months, we would be more opportunistic in buying the sector with exposure to an index fund or an ETF,”– Chad Morganlander
Does It Make Sense For Investors To Find Top Energy Stocks To Buy Now?
Something to keep in mind, however, is that volatility is likely to stay. As we know, coronavirus cases are not slowing down particularly in the US, Brazil and India. And certain countries that previously were able to contain the viruses are seeing a resurgence in cases. When these coronavirus cases continue to rise, this will be a drag on global growth and dampen the hope for economy reopening. Now that the energy industry is showing signs of rebound, let’s take a closer look at some interesting plays in the sector.
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Top Energy Stocks To Buy Right Now [Or Avoid]: Bloom Energy Corporation
Bloom Energy (BE Stock Report) is no stranger to energy stock enthusiasts. For many who have never heard of this company, don’t fret. For those who know, you would agree to BE stock might have been the best energy stock to buy under $4 earlier this year. After making a huge jump in July, BE stocks continued to reward investors in the past few months. The company’s recent activities in South Korea have certainly driven investors’ interest in the stock once again. The reiteration of the overweight rating from Morgan Stanley is also giving a boost to BE stocks.
The company has been gaining attention as a pure-play fuel-cell stock. The company aims to redefine the electric power market through its distributed, on-site electric power solution. Its solution can deliver highly reliable, uninterrupted power that is also clean and sustainable. On top of that, it could also use its electrolyzers to make hydrogen, which goes into the fuel cells. The company is certainly not keeping their hydrogen ambitions hidden. They want a piece of the hydrogen economy. This would potentially be huge considering Europe in particular, where governments plan to invest hundreds of billions of euros in this area by 2050.
Bloom Energy’s two facilities in South Korea would definitely deserve our attention. It may lead to bigger things to come. That’s taking into account the government’s support for the technology. Bloom Energy is well aware of South Korea’s government target of 15,000 MW of stationary fuel cells by 2040. That is a growth opportunity that can’t be missed. With all that in mind, would BE stock be a top energy stock to buy and hold for years if not decades?
Top Energy Stocks To Buy Right Now [Or Avoid]: Chevron Corporation
When looking for the best energy stocks to watch, Chevron (CVX Stock Report) would usually top the list. After all, Chevron is now the largest U.S. oil stock by market cap after overtaking ExxonMobil (XOM Stock Report). Even though it is now the largest U.S. oil company, it’s only trading at a fraction of what it was earlier this year. The coronavirus pandemic has been brutal for the oil industry in general, to say the least. CVX stock is 40% lower year-to-date.
No doubt, lower oil prices are a major factor for the plunge in stock price. But oil price volatility is only one part of the equation. Another significant pullback could be because of a shift in investor sentiment away from fossil fuels toward renewable energy. If you have been paying attention to the development of the electric vehicle industry, you would know where both consumers and investors alike are putting their hard-earned money. This would inevitably see the profits of oil giants like Chevron erode as demand falters and crude prices crumble.
Of course, industry giants have seen this coming. Fellow big-oil producer BP (BP Stock Report) appears to have acknowledged that demand has already peaked. As such, BP is also joining others in gaining exposure toward the renewables sector so that it’s not left out. Of course, you could argue that for the EV revolution to fully take place, there is still some time from now and energy stocks like Chevron could still benefit once we get on the other side of COVID-19. A recovery in the energy sector could only be a matter of time. In that case, is CVX stock the best energy stock to buy in anticipation of a safe and effective vaccine?
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Top Energy Stocks To Buy Right Now [Or Avoid]: Diamondback Energy Inc.
The oil industry needs to cut costs to combat lower oil prices. And for smaller energy stocks like Diamondback Energy (FANG Stock Report), analysts believe that consolidation is the way to go if we don’t have a solution to the novel coronavirus soon enough. This came after Devon Energy (DVN Stock Report) and WPX Energy (WPX Stock Report) confirmed their merger of equals news. This news certainly gained its fair share of attention, prompting speculation that there could be more oil and gas deals in the pipeline.
Deals like this suggest that the industry is ripe for consolidation. When a financially strong buyer takes over a sound target in an all-stock deal at a reasonable valuation, there is a good chance it could work out. These transactions can often boost financial metrics without affecting their balance sheet negatively.
FANG stock certainly has the potential to be chosen by one of the industry leaders as an acquisition target. This would send the stock higher when there are rumors about the merger deals. Of course, this is just my personal view. I am not aware of any acquisition rumors at this moment. In any case, we shouldn’t make investment decisions based on rumors alone. But with the volatility in the oil industry, companies need to take steps that may not be immediately comfortable to ensure their survival. And hopefully, when the pandemic is over, companies like FANG and the rest will be able to deliver to shareholders once again.
