If Energy Stocks Are Undervalued, Is Now The Time To Buy?

Key takeaways

  • With oil prices dropping, it’s clear that oil as a commodity can be highly volatile since it’s strongly tied to supply and demand, along with other global factors.
  • With fears of a recession, soaring inflation and aggressive rate hikes, it’s unknown what the future holds for the economy. Consequently, there have been numerous stock market sell-offs this year.
  • When energy prices go up, it’s expected that companies in the energy sector will enjoy higher revenues. We saw this during the post-pandemic boom when folks returned to everyday life and resumed traveling.

Oil prices soared during 2022, and energy stocks increased while the rest of the markets became turbulent.

Generally speaking, oil can be highly volatile as a commodity and oil prices will influence the value of oil stocks. Oil prices have been impacted by fears of a recession, the Russian invasion of Ukraine and the production cuts we saw in October.

When it comes to investing in energy stocks, there are many different ways you can allocate your funds towards this space, from selecting companies in different types of energy to all of the firms that generate revenue to production, marketing and delivery.

We’ll look at ways to invest in energy stocks right now.

What’s happening in the energy sector?

Energy is a broad term that can refer to many different types of companies and industries. Oil, natural gas and green energy are options for investing.

According to the recent Consumer Price Index (CPI) report, the price of energy commodities increased 12.2% from one year ago and has been a contributing factor to the stubborn inflation numbers.

MORE FROMFORBES ADVISOR

Here are a few of the key highlights from the energy sector.

TryqAbout Q.ai’s Global Trends Investment Kit | Q.ai – a Forbes company

Oil prices have dropped recently

Oil prices have plunged a bit as the commodity fluctuates based on supply and demand. The oil demand has dropped due to fears of a global recession, additional COVID-related lockdowns in China and key U.S. oil refineries reopening after being closed for maintenance.

Despite the recent price drop, OPEC Plus announced that it wouldn’t cut oil production. There was plenty of controversy when the group decided to cut oil production in October. Since the group controls 40% of the world’s oil supply, this is a significant development for energy prices.

The world is looking for renewable sources of energy

We can’t ignore that the world is continuing the transition to cleaner energy sources. President Joe Biden signed the Inflation Reduction Act into law this year, which allocates $369 billion toward the battle against climate change by funding and developing greener energy sources.

Renewable energy sources, including wind, solar and water, are much better for the environment since they don’t emit greenhouse gases.

Many companies will want to go green due to the increased demand for renewable energy sources. Companies in this energy sector are going to hopefully see increased revenues.

However, it’s worth mentioning that the transition towards cleaner energy sources will be slow as there are many technological and infrastructure requirements that need to be developed.

Is now the time to buy energy stocks?

With constant market fluctuations based on reactions to inflation data and rate hikes, the stock market is in a highly turbulent time.

Here are a couple of points to consider about investing in energy stocks.

The world will always need utilities

We’ve looked at recession-proof stocks in the past, and we can’t deny that consumers still need basic utilities even during the worst economic times.

Consumers still need electricity to power their homes and natural gas for heating as the winter months approach in many parts of the world.

Breakthroughs are happening in the renewable energy sector

It was recently announced that there was a significant breakthrough in the nuclear fusion space, which could present us with clean, limitless energy in a few decades if all goes according to plan.

While the transition towards renewable energy sources will take some time, we can’t ignore that plenty of growth can be expected from investing in the energy sector.

What energy sectors can you invest in?

Clean energy and other energy stocks provide many ways to invest in this sector. These are the different energy sectors that you can invest in.

  1. Renewable energy sources: With the global transition towards greener energy sources, many companies like Plug Power Inc and Stem Inc are worth considering as investments.
  2. Oil companies: With oil prices experiencing surges at points throughout 2022, many other companies like ExxonMobile Corporation and Occidental Petroleum Corporation are worth looking at.
  3. Natural gas and LNG: Due to ongoing geopolitical issues with Russia, many companies in this field saw revenues surge in 2022. Other notable stocks in this sector include Coterra Energy and Range Resources Corporation.

What are energy stocks worth investing in?

If you’re looking to invest in the energy sector, we’ve found a few stocks worth putting your money into. We’ll look at a broad spectrum of energy stocks so that you have multiple options.

Some of these stocks have soared in 2022, while some are in a position to perform much better in 2023.

Tesla (TSLA)

The electric vehicle manufacturer is also a leader in the green energy movement. Tesla has been able to generate substantial profit from selling regulatory credits issued by the government. It also recently launched an all-electric semi truck.

The stock closed at $149.87 on Monday, December 19 and currently sits at $123.52 closing in on the end of this week, which means it’s down almost 70% year to date.

Brookfield Renewable Partners L.P. (BEP)

Brookfield Renewable creates electricity with hydroelectric, wind, solar and biomass sources. They have a globally diversified portfolio of renewable power sources, and they’ve taken a leadership role worldwide when it comes to decarbonization.

The stock closed at $26.11 on December 19 and currently sits at $25.70, which means it’s dropped 28.1% year to date.

First Solar Inc. (FSLR)

First Solar is a worldwide leader when it comes to making solar panels. As demand for solar energy increases, they will see an increase in revenue.

With governments spending more money on renewable energy sources, right now is an excellent time to look into the solar sector.

First Solar stock closed at $156.77 on December 19 and is currently trading at $154.81, which means that the stock has gone up about 75% in 2022. As a particularly small player on this list, the real question is, will it continue to climb?

Kinder Morgan Inc. (KMI)

Kinder Morgan has the largest natural gas transmission network in the country. Since natural gas travels through pipelines, the infrastructure for this energy sector is critical for rapid transportation. The terminals also hold renewable fuels, chemicals and other products.

Kinder Morgan stock closed at $17.51 on December 19 and currently trades at $18.06, bringing the share value up 10.46% year to date.

Shell Plc (SHEL)

Shell is one of the world’s leading natural gas and LNG suppliers. The company has been investing in natural gas infrastructure and increasing LNG plants’ supplies.

With a solid global position as a significant LNG supplier and a recognizable brand, this energy company is worth investing in.

Shell currently sits at $57.39, a 28.49% lift for fiscal 2022.

How should you be investing?

Investing in energy stocks can involve many different kinds of companies, ranging from oil production to natural gas to electric vehicles.

While some investors prefer to invest in well-established oil conglomerates that have been around for decades, others want exposure to greener energy companies that could offer more growth potential.

If you want to invest in cleaner energy sources, you may want to look into Q.ai’s Global Trends or Infrastructure Kit. Q.ai takes the guesswork out of investing by using artificial intelligence to create portfolios that fit different risk tolerances and economic situations.

Best of all, you can activate Portfolio Protection at any time to protect your gains and reduce your losses, no matter what industry you invest in.

Download Q.ai today for access to AI-powered investment strategies. When you deposit $100, we’ll add an additional $100 to your account.

Leave a Reply

Your email address will not be published. Required fields are marked *