8 Investment Experts Take a Deep Dive Into Energy Stocks

After settling back from summer highs, oil prices -- and energy stocks -- have been showing renewed strength. Eight leading advisors, and contributors to MoneyShow.com, highlight their favorite energy investments, ranging from oil and gas exploration to oil field services, energy infrastructure and transportation. Elliott Gue, Energy & Income Advisor The key word for energy investors to follow now is patience -- don't be tempted to chase momentum. Bear markets always include large rallies that trap investors to buy at exactly the wrong times. I believe our research supports three key findings. First, we're in the early stages of an energy and commodity supercycle driven by massive underinvestment in new supply. Second, energy is likely to significantly outperform the broader market through the coming bear cycle and pullbacks are likely to be far shallower than for the general market. Third, energy is likely to emerge as a leadership group in the next big bull market. SLB -- previously called Schlumberger -- remains a top pick for us through the current cycle. I know most of you already own it but you should look to accumulate it on dips below $47. If we get a panicky market selloff that takes the stock to $30, that's an outstanding opportunity to load up on this name. Longer term, I see SLB revisiting at least its 2017 peak at $80 -- after all, by the end of next year SLB will be growing faster than it did in the last cycle, and will have higher profit margins and higher revenues. Exxon Mobil is another large-cap winner -- it's jumped of late but traded below our recommended buy price of $85 as recently as the end of last month. We'd wait for dips under that level to accumulate more. XOM has arguably the best production growth profile of any of the large super oils and had the foresight to invest in new supply when prices were low. It'll reap the benefits of those investments in the form of higher production and cash flows through the coming supercycle. Chesapeake is a solid gas-focused name to buy here, in my view. The company is now focused on two of the most promising gas plays in the U.S. -- the Haynesville in Louisiana and Appalachia's Marcellus. I'm particularly impressed with how the stock has remained firm despite the big selloff in gas -- the stock is a buy under $110 and should yield in the high single to low double digits even with gas averaging close to current levels over the next 12 months. Finally, refiner Valero Energy is an underappreciated beneficiary of the current energy cycle. Global refining capacity has been crimped by a combination of weak profitability for much of the past five years and government policy/resistance to new refinery builds and expansions. The result: there's a dearth of refining capacity that's arguably just as acute as the dearth in oil supply. That's bullish for Valero and I'd recommend buying dips below $105. Mark Skousen, Five Star Trader Black Stone Minerals, L.P. -- based in Houston, Texas -- is a partnership with oil and natural gas mineral interests in 41 states. Business has been booming and the stock has been steadily moving higher. Revenues rose 86% in the past year to $651 million. Earnings have risen even faster to $254 million. Profit margins exceed 42% and return on equity is 27%. It has $12 million in cash, which is plenty to support its $86 million in debt. Black Stone Minerals has been so successful that it has increased its dividend from 25 cents per unit to 42 cents in the past year, giving us a 9% yield! Yet the stock is selling at less than eight times expected earnings in 2023. Let's add Black Stone Minerals to our portfolio today and set a protective stop of $14 a share. Faris Sleem, The Bowser Report Dynagas LNG Partners LP is a liquified natural gas (LNG) maritime transportation company established in 2004. The company offers in-house ship management services and has a fleet of six LNG carriers. Increasing demand for LNG and the company's high-quality contracts with major LNG companies have set DLNG up for long-term success. Consistent growth has been the primary catalyst for value creation since 2018. Additionally, the company has beaten earnings expectations for six of the last eight quarters. DLNG's valuation is incredibly attractive given the current state of the stock market. The stock is trading at one-third of its book value, and its price/book (P/B) ratio of 0.37 is 47% below its five-year average. Meanwhile, its P/E and price/sales ratios indicate a 71% and 27% undervaluation, respectively, relative to its competitors. With book value increasing 32% since 2019, we are excited to see what DLNG has in store for patient shareholders. DLNG offers a unique value opportunity. Consistent financial performance and deleveraging have created a solid foundation for future growth, and exposure to a strong LNG market and leveraging of in-house technical innovation pave the way for value creation in the years to come. Buy below $3 a share. Todd Shaver, Bull Market Report Dallas-based master limited partnership Energy Transfer Partners is more than what meets the eye. Apart from being one of the largest midstream partnerships, engaged in natural gas and propane pipeline transport, the company has made acquisitions and investments across the energy value chain that has led some analysts to call it the Berkshire Hathaway of the energy sector. One key catalyst for the company comes in the form of strong insider buying activity. One of the co-founders of the company, Kelcy Warren recently increased his stake in the company by 3 million shares, a great sign for investors. The company recently boosted its dividend, resulting in a recent yield of 8.7%, in line with the company's strategy to return additional value to shareholders. Trading at just 0.40 times sales, and under 7 times earnings, ET currently remains a deep value opportunity in comparison to peers in the midstream industry. Analysts continue to reiterate a Buy on the stock with the average price consensus at $14.60, presenting an upside of 26%. Some have a target as high as $20, representing an incredible 73% upside from current levels. Bryan Perry, Cash Machine Coterra Energy Inc. was formed by the all-stock merger of Cabot Oil & Gas Corp. and Cimarex Energy Co. in October 2021 to become one of the largest U.S. energy companies today. It produces 75% natural gas, of which only 25% is hedged, so it's a nice way to get exposure to U.S. natural gas prices. Coterra is now the fourth-largest producer of natural gas in the United States with vast reserves for both oil and gas. For 2022, Coterra is forecast to report revenue growth of roughly 160% to $8.93 billion and earnings of $5.12 per share, up 127% from 2021. The company has surpassed sales and earnings forecast for the past two quarters and raised the dividend substantially as the policy dictates. Shares of CTRA are trading near $30 and well off the yearly high of $36 to where the recent dividend yield was a hugely attractive 9.04%. The next ex-dividend data come around November 12. Let's put this super well-positioned energy company to work in our Accelerated Income Portfolio and look for big returns both in income and growth going forward. Rich Moroney, Dow Theory Forecasts EOG Resources has been focusing on maximizing return from its wells rather than maximizing production. Its concentration on cost controls has paid off handsomely over the last eight years. EOG's operating profit margins have risen to 42.7% from 37.3% since the start of 2016, when the company began targeting premium wells. In 2014, EOG needed oil prices of $83 per barrel to earn a return of 10% on capital. Last year, it only needed $44. The combination of increasingly efficient production and rising prices generated explosive growth in recent quarters. The benefits of that efficiency will become more apparent, however, when energy prices fall, as they inevitably do. Analysts project profit growth of 7% in 2023 and a decline of 11% in 2024, reflecting a normalization of prices. EOG trades at nine times the 2024 estimate. The indicated year-ahead yield of 2.3% understates EOG's true income potential. In addition to the base annual dividend of $3 per share, EOG has paid four special dividends totaling $6.30 per share over the last year. We can't build those special dividends into the indicated yield, but the combination of regular and special dividends equates to a trailing yield of 9.0%. Mike Cintolo, Cabot Top Ten Trader Among the bigger cap oil plays, Diamondback Energy -- which focuses on the Midland and Delaware basins -- might have the best set of acreage, the best management team and the best cash flow profile. And given that, as of July, the firm had finally hit its debt reduction target, Diamondback now plans on returning (dividends or share buybacks) a full 75% of its free cash flow starting in Q3, which is obviously going to keep many investors interested. Meanwhile, the top brass isn't just harvesting cash flow but remains on the offensive: In August, it swallowed up its own MLP. And then, the company announced a good-sized buyout in the Midland basin, costing around $1.7 billion of cash and stock that will add 350 drilling locations and 68,000 acres. Stepping back, before the Midland proposal, Diamondback cranked out $1.3 billion of free cash flow in Q2 (when prices where higher) and, looking ahead, should see north of $20 of free cash flow next year even if oil is in the $70 range. FANG topped with the oil group in June, but now seems to be changing character; it was one of the first to take out its August/September highs and has been racing toward the June peak. We like it, but favor looking for dips if you want in. John Buckingham, The Prudent Speculator Shares of integrated energy titan Exxon Mobil continued their march higher in 2022, following the release of solid Q3 financial results. Even with high expectations, Exxon reported revenue for the period of $112.1 billion, 8.7% higher than the consensus estimate. Adjusted EPS came in at $4.68, more than 19% greater than the $3.91 forecast. Management said strong volume performance, including record refining volumes, cost controls and higher natural gas realizations more than offset lower crude realizations and weaker industry refining margins. Free cash flow of approximately $17.6 billion was the second highest quarterly amount ever. Shareholder distributions were $8.2 billion for the quarter, including $3.7 billion of dividends and $4.5 billion of share repurchases, bringing year-to-date repurchases to $10.5 billion. The company also declared a fourth-quarter dividend of $0.91 per share, payable on December 9. The increase of $0.03 per share marks 40 consecutive years of annual dividend growth. We don't see global energy supply issues easing in the near future with the continued war in Ukraine leading much of Europe to need to source energy away from Russia and with a long period of industry-wide under-investment in exploration and production. XOM shares have a 3.3% dividend yield and trade at less than 10 times next 12-month adjusted EPS projections. Our target price has been lifted to $132.

8 Investment Experts Take a Deep Dive Into Energy Stocks

Leading advisors highlight their favorite energy names, ranging from oil and gas exploration to oil field services, infrastructure and transportation.

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