5 Energy Ideas to Add Fuel to Your Portfolio

With stocks near all-time highs, many investors have given up on value. Not so with Crista Huff; the contributor to MoneyShow and editor of Cabot Undervalued Stocks Advisor, continues to patiently search for undervalued sectors of the market. One area where she currently sees opportunity is the energy space. Here, she reviews five current favorites. Marathon Petroleum -- with a yield of 3.5% -- is a leading integrated downstream energy company and the nation's largest energy refiner, with 16 refineries, majority interest in a midstream company, 10,000 miles of oil pipelines and product sales in 11,700 retail stores. The company is prepared to meet the IMO 2020 demand for ultra-low-sulfur diesel fuel by the world's ships and tankers. Marathon aims to spin off their Speedway retail stores into a separate company by early fourth quarter 2020. Crude oil prices are rising back toward September peaks as markets embrace prospects of a U.S.-China trade deal, additionally bolstered by the recent optimistic economic outlook coming from the Federal Reserve. Marathon recently announced that it has entered into an agreement with Elliott Management and will appoint Jonathan Z. Cohen to the company's board of directors. Mr. Cohen has extensive experience in the energy industry, and currently serves as Chairman of Falcon Minerals Corporation. He will serve on Marathon's special committee charged with evaluating options for the midstream business, as well as the special committee charged with overseeing the CEO search process, which continues to progress. The company expects to update investors on strategies to optimize their midstream business in the first quarter of 2020. Marathon is a greatly undervalued large-cap stock with a solid dividend yield. Full-year EPS are expected to fall 28% in 2019, then rise 67% in 2020. The 2020 P/E is very low at 8.3. The stock had a November pullback after a 50%+ run-up, found a bottom near $58, and is now rising. The stock is a strong buy. Total S.A. -- with a yield of 5.6% -- is a French multinational integrated energy company that produces and markets fuels, natural gas and low-carbon electricity, operating in over 130 countries. Total is the second-largest private global liquified natural gas (LNG) player, with a worldwide market share of 10%. Crude oil prices are rising back toward September peaks as markets embrace prospects of a U.S.-China trade deal, additionally bolstered by the optimistic economic outlook coming from the Federal Reserve. Total is an undervalued, large-cap growth & income stock with a large dividend yield. Consensus earnings estimates for 2020 continue to rise. The market now expects Total's EPS to fall 6.3% in 2019, then to increase 17.5% in 2020. The 2020 P/E is 9.7. The stock is rising along with energy industry peers. Investors who buy now will lock in the 5%+ dividend yield, and benefit from additional capital gains. The stock is a strong buy. Schlumberger -- with a yield of 5.1% -- is the world's largest oilfield service company. Crude oil prices are rising back toward September peaks as markets embrace prospects of a U.S.-China trade deal, additionally bolstered by an optimistic economic outlook coming from the Federal Reserve. Recent research from Barclays projects a 2% increase in 2020 spending on global exploration and production, reflecting strength in the Middle East, Latin America and offshore, and weakness in North America. This could bode well for oilfield service companies (including Schlumberger and Baker Hughes), where sentiment does not currently reflect attractive international performance. SLB is a large-cap stock with a 5.1% dividend yield. Wall Street expects EPS to fall 9.3% in 2019, and then to increase 18.5% in 2020. The 2020 P/E is 22.8. Citigroup named Schlumberger as one of their top oilfield service stocks for 2020, saying that long-term headwinds are abating for the sector, assisted by OPEC's newest production cuts. A recent run-up brought Schlumberger to upside price resistance at $40. The next up move will likely take SLB to $45, where it last traded in April. Buy now to lock in the large dividend yield and benefit from the capital gain prospects. The stock is a buy at current levels. Baker Hughes Company -- with a yield of 3.0% -- offers products, services and digital solutions to the international oil and gas community. Both the Turbomachinery & Process Solutions segment and the Oilfield Equipment segment experienced very strong order growth during the third quarter, and are expected to carry that strength into 2020. Crude oil prices are rising back toward September peaks as markets embrace prospects of a U.S.-China trade deal, additionally bolstered by an optimistic economic outlook coming from the Federal Reserve. Recent research from Barclays projects a 2% increase in 2020 spending on global exploration and production, reflecting strength in the Middle East, Latin America and offshore, and weakness in North America. This could bode well for oilfield service companies (including Schlumberger and Baker Hughes), where sentiment does not currently reflect attractive international performance. Baker Hughes Company is an undervalued, mid-cap aggressive growth stock, expected to increase EPS by 34% and 47% in 2019 and 2020. The 2020 P/E is 18.8. Citigroup recently named Baker Hughes as one of their top oilfield service stocks for 2020, saying that long-term headwinds are abating for the sector, assisted by OPEC's newest production cuts. In addition, Stephens began coverage on Baker Hughes with an overweight rating. The stock rose nicely in December, and finally appears capable of a near-term move past $25. We rate the stock a buy. VanEck Vectors Oil Refiners ETF seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the MVIS Global Oil Refiners Index. Crude oil prices are rising back toward September peaks as markets embrace prospects of a U.S.-China trade deal, additionally bolstered by the optimistic economic outlook coming from the Federal Reserve. Recent research from Barclays projects a 2% increase in 2020 spending on global exploration and production, reflecting strength in the Middle East, Latin America and offshore, and weakness in North America. This could bode well for oilfield service companies (including Schlumberger and Baker Hughes), where sentiment does not currently reflect attractive international performance. The International Maritime Organization is mandating the use of either scrubbers or low-sulfur diesel fuels for the world's 39,000 ships and tankers, beginning in January 2020. The purpose of the mandate is to minimize sulfur oxide (SOx) emissions into the atmosphere, and the mandate is nicknamed IMO 2020. Oil refining companies are expected to profit from the demand for low-sulfur diesel fuel. CRAK pays an annual dividend in late December, usually yielding 1-2%. I expect continued strength from this exchange-traded fund in 2020. The ETF is a strong buy. Subscribe to Cabot Undervalued Stocks Advisor.

5 Energy Ideas to Add Fuel to Your Portfolio

The energy space is showing some attractive value opportunities.

Columnist Conversation

We're Shedding Some of This Holding on Strength

Thoughts Ahead of the Fed Minutes

An Interesting Chart

COLUMNIST TWEETS

Please Join or Log In to manage and receive alerts.