Pump Up Your Profits With These 6 Energy Stocks

Energy stocks have been hit hard recently, as traders focus on potential concerns from OPEC to COVID variants. Long-term however, the economically sensitive group remains a favorite of MoneyShow.com contributors. Here are six best-of-breed ideas in the energy space. Elliott Gue, Energy & Income Advisor Our number-one rule of picking takeover targets is to never buy a company we wouldn't want to own if there was never a deal. These stocks definitely qualify on that score. Among the larger and more diversified midstream companies, Magellan Midstream Partners continues to stand out as a prime takeover candidate. The company's well-located refined products and crude oil transportation and storage assets serve a list of blue-chip customers. And the sale of its 26 independent terminals network with 6 million barrels of storage for $435 million announced earlier this month will further focus operations on cornerstone assets. Chief of these is the nation's longest refined petroleum products system, which connects nearly 50% of U.S. refining capacity with 100 million barrels plus of storage. Cash flows from that system proved resilient last year, despite volume disruption due mostly to the pandemic. Now they're getting a strong jolt from recovering throughputs as Americans take to the roads and the skies again this summer. Second-quarter earnings released in late July should show more of that positive momentum. Meanwhile, the cash from the sale of its terminals will further shore up the already strong balance sheet, which at BBB+/stable outlook (S&P) is tied for the highest rating of any major midstream company or MLP. Magellan would merge easiest with another MLP as that would avoid tax consequences. But buying in its general partner and eliminating incentive distribution rights several years ago should also decomplicate any transaction and confer more benefit to ordinary shareholders. Our highest recommended entry point has long been $75. That's still well above Magellan's current price, despite sizeable gains since November. And as such, it demonstrates how much higher the unit price could go in the next couple years, in addition to paying the well covered dividend of better than 8%. Crestwood Equity Partners , at less than $2 billion in market capitalization, would be a considerably smaller mouthful than Magellan at $11.3 billion. Crestwood also announced a streamlining move in recent weeks, with the sale of its stake in the Stagecoach system to Kinder Morgan. Devoting sales proceeds largely to debt reduction is likely to earn the MLP a credit rating upgrade, with Moody's putting the company on positive creditwatch. But the real attraction of the company is its leverage to the energy price cycle, with well-positioned gathering systems in the Bakken, Powder River Basin and Delaware Basin of the Permian. In addition, Crestwood has made its own simplification move, acquiring the general partner and limited partner interest of First Reserve and transitioning to an independent MLP with an elected Board of Directors. That makes the path to a takeover considerably easier, even as the company makes itself a more attractive target by devoting free cash flow after dividends to paying off debt and buying back shares. There's also an 8% dividend yield to reward our patience. Crestwood is a buy up to our raised highest recommended entry point of $35. Genia Turanova, Curzio Research's Unlimited Income Schlumberger is the undisputed international leader in products and services for oil & gas producers. Founded in 1926, the company employs some 82,000 people across 120 countries today. Simply put, its technology and services make exploring for oil and producing it easier and more efficient. Its high-tech services are indispensable for all stages of production, from the discovery to the oil well to the pipeline. It helps customers save money in the long run by servicing almost every step of the exploration and production process. Longer-term, Schlumberger is quietly working on a variety of sustainability projects. Early in 2020, the company started its New Energy business venture with a focus on energy efficiency and storage... and breakthrough technologies in green energy. It's a fast-growing market: $50 billion to $75 billion will be spent annually by the end of this decade. With a range of projects and partnerships in areas ranging from carbon capture... to geothermal energy... to hydrogen... to lithium, Schlumberger is making sure it will remain relevant for decades to come. Profits are growing at a mind-numbing rate. Schlumberger used to trade at a significant premium to the market. But with a recent forward P/E of just over 19, it currently trades at a 10% discount to the market. One thing is for sure: If energy prices remain strong, SLB's business will do great. It's the go-to oil service company for the entire industry, be it in the U.S. or internationally. And the company's New Energy portfolio will ensure its growth continues even as demand for fossil fuel declines. Sean Brodrick, Wealth Megatrends ConocoPhillips is great stock. And this recent selloff is giving you a good buying opportunity. Conoco has a strong presence in Lower 48 major acreage areas that comprise prolific shale plays like the Permian Basin, Bakken and Eagle Ford. It also has an opportunity in Alaska the market is ignoring -- for now. Management recently issued an ambitious 10-year operating plan focused on efficiency, highlighted by the reduction of 2021 capital expenditure by $200 million from the previous estimate of $5.5 billion. Also, it expects adjusted operating costs to decrease by $100 million from the prior estimate to $6.1 billion. Despite this, Conoco anticipates 3% compound annual growth in production. Talk about squeezing more profit out of every penny. Due to the pandemic, Conoco actually lost money last year. This year, it's projected to earn $3.88 a share. That's an increase of 500%! Sweet! Management will report second-quarter financial and operating numbers on Aug. 3. I expect good news. Last year, Conoco acquired Concho Resources with its rich Permian Basin properties. Conoco has $7.3 billion in cash sitting on its books, so it could easily make more accretive acquisitions going forward. Conoco also announced it was increasing its share repurchase program. The latest buyback move is likely to bring the total 2021 planned distribution (including dividends) to $6 billion. In 2020, Conoco was the top oil producer in Alaska with average daily production of 198,000 barrels of oil equivalent per day. Alaska oil gets Brent prices, which is higher than the West Texas Intermediate (WTI) price. Nice! Conoco is developing the massive Willow Field in Alaska, which is currently estimated to contain 400 million to 750 million barrels of oil equivalent of recoverable petroleum. It will be producing for more than a decade. ConocoPhillips sports a dividend yield of 2.9%. That payout is projected to grow 3.57% per year for the next three years. My target is $78 a share, for starters. As management cuts costs, raises the dividend and buys back shares, COP could go much higher. Rida Morwa, High Dividend Opportunities We're buying from the midstream sector hand over fist to add to our long-term reliable income portfolio. We love businesses where we can collect reliable income from assets vital to the economy. Here are two high-yielding midstream stocks that let you benefit from this commodities bull run while collecting growing returns for years to come. Enterprise Products Partners owns over 50,000 miles of NGL, crude oil, natural gas, petrochemicals, and refined products pipelines, as well as significant processing capacity assets. The company is in a sweet spot. Demand for natural gas and natural gas liquids ('NGLs'), the main drivers of its revenues, are soaring. Being on the verge of a new commodity supercycle, EPD will be one of the biggest beneficiaries. With a 3.5x debt to EBITDA ratio, EPD is one of the least leveraged midstream companies and can pay for capital projects through a portion of its free cash flows that are retained for this very purpose. Insiders own a sizable 32% of EPD's shares outstanding, which is a big plus for value investors since it gives us a sense of confidence that the management team's interests are aligned with those of the shareholders. It's rare to find an investment-grade quality company that yields 7.4% and with a distribution that grows every year. EPD is such a company that you want to be invested in. This stock is grossly undervalued today and makes a great long-term investment. EPD could be the biggest winner in your retirement portfolio! Be aware that EPD is a master limited partnership and issues a Schedule K-1. Enbridge, Inc. is North America's largest pipeline-focused company by enterprise value. Some 95% of the its customers are investment grade while 98% of its capacity is contracted. That means ENB has maximum reliability with minimum risk. Enbridge caries and investment-grade ratings (average BBB+), which allows investors to sleep well at night. The stock currently yields 6.9%, and the company has a 26-year history of paying growing dividends to investors. Despite four oil crashes and the two terrible bear markets, the company has a 10% dividend compounded annual growth rate since 1995. This is very impressive! This is the power of Warren Buffett's toll booth theory, where vital assets can continue to be monetized for decades. Enbridge is set to continue growing its asset base, while investors expect growing distributions for years to come. This is one of the safest midstream for income investors, providing recurrent paychecks for your retirement accounts. Note that Enbridge is a C-Corp and issues 1099s (no K-1s) at year-end, so you can benefit from this cash machine.

Pump Up Your Profits With These 6 Energy Stocks

These favorites of experts are best-of-breed in the energy space.

Columnist Conversation

Amazon: Friday and Next Week Might Be a Prime Buying Opportunity

This Weekend on Real Money

SDC: A Close Above the 20 DMA and Holders Will Be Smiling

COLUMNIST TWEETS

Please Join or Log In to manage and receive alerts.