5x Energy Stocks with Value [2022]
04 juni 2022 
13 min. read

5x Energy Stocks with Value [2022]

2022 is the year of energy stocks. Where the S&P 500, AEX and other index funds are plummeting, energy ETFs and energy stocks are rising to new heights. Many investors expect this trend to continue this year. But is investing in energy stocks a good move? Below we look at pros and cons and important tips. In addition, we review 5 energy stocks with Value, for inspiration and entertainment.

Let's get started!

What is an Energy stock?

invest-in-energy-stocks-2022

An Energy stock is a publicly-traded company that is involved in the extraction, processing, distribution, or sale of energy. Energy stocks are frequently characterized by high growth rates and high volatility. This means that the stock price can fluctuate wildly, but this also means that it can grow quickly if you invest in the right company at the right time.

The most common types of energy stocks are oil and gas companies, which extract oil from the ground and sell it on the market. Energy companies can be involved in extracting, processing, and distributing oil, gas and coal; developing renewable sources of energy like wind or solar power; or providing electricity to customers.

Pros

  • Energy stocks can be a good investment in certain times because they are driven by the world's demand for energy, which is expected to grow over the next decade.
  • The energy industry is here to stay. In developed nations, there will always be a need to fuel cars, light buildings, and keep food cold. As a result, energy company products will never lose customer acceptance.
  • When energy prices rise, energy businesses can gain by receiving much more per barrel of oil, even if their costs remain roughly the same. This is an opportunity for them to increase dividends to investors or to invest for future growth. This is the biggest pro of energy stocks. If price increases rapidly, while fixed costs remain the same, then the share price will explode in several months.
  • Because they're so volatile, they also tend to offer great returns when the market is doing well. If you can ride out the ups and downs, you'll get some incredible returns on your investment. Energy stocks are cyclical. It requires certain skills and knowledge to profit from them, because the risk is high.

best-value-stocks

Cons

  • You need to have a solid understanding of macroeconomic trends before investing in this sector because it's very dependent on external factors such as weather patterns, natural disasters, and geopolitical events.
  • There are many different types of energy companies out there and it can be difficult to determine which ones will perform well in any given year or even month.
  • Despite the fact that oil is at the heart of the current commodity super-cycle, oil stocks are fundamentally cyclical. That means that oil investors will have to exit at some point in the future to secure their gains.
  • Over the last decade, new green energy sources such as solar have gotten considerably less expensive. This reduces demand for coal and may begin to harm demand for oil, gas, and other traditional energy sectors, potentially compromising their long-term worth.
  • Sometimes it takes longer than expected for an energy company's profits to start growing again after an economic recession ends (like during 2008-2009), which means they may not make as much money as hoped.
  • Because they are cyclical, it is not a passive long-term investment like dividend stocks are.

How do we select the best Energy stocks

As indicated, all energy stocks are quite cyclical. Timing is of great importance. The best way to invest in energy stocks is from a macro perspective. You want to get in before the herd invests. This is how you realize phenomenal returns of x10 or even x50.

Within Happy Investors, our expertise lies in long-term investing in the best stocks. These are unique companies with sustainable competitive advantage. Additionally, we use factor analysis to discover Value stocks in the short term of 6 - 24 months. These Value stocks require a slightly more active trading method, for example by selling after X months. On the other hand, they do offer potentially (much) higher returns than the S&P 500, precisely because we use short-term undervaluation.

However, you find the best energy stocks by investing early. That's a skill in itself. We significantly outperform the market with our Value shares in 2022. But our partner Capitalist Exploits is a real expert in commodities and asymmetric investing. Because we are in a partnership, we are not allowed to share their recommendations, but from personal experience I can assure you that the average return of its energy stocks (as of 2016) is extremely interesting.

Click on the banner below to learn more about their research.

best-value-stocks

Energy stock 1. Arch Resources (ARCH)

cursus-happy-investorsbest-energy-stocks-2022Source: Happy Investors Analysis Q2 2022

Arch Resources is the world's leading supplier of premium High-Vol A metallurgical coal and a prominent US producer of metallurgical products for the global steel industry. Arch and its subsidiaries own and operate four big, modern metallurgical mines that continuously set industry standards for mine safety and environmental care.

The flagship Leer mine consistently scores among the lowest-cost metallurgical mines in the United States, producing a product quality that is recognised and sought-after globally.

Arch and its subsidiaries also run highly efficient, low-cost thermal mines in the Powder River Basin and Colorado. These mines produce highly cost-effective thermal coal for domestic and international power generation markets.

Arch Resources is a commodity company that operates in a cyclical market. Its revenue growth rates were significantly negative in 2020, but Arch Resources was able to turn around its operations and generate very appealing growth rates in 2021. This company may be among the best energy stocks by 2022. However, a major drawback is that coal stocks are anything but sustainable companies!

It should come as no surprise that the scenario at hand is highly fluid, and that the share price of Arch Resource will be highly unpredictable.

Energy stock 2. Exxon Mobil (XOM)

 best-energy-stocks-to-buy-in-2022Source: Happy Investors Analysis Q2 2022

The ExxonMobil Corporation, sometimes known as XOM, is one of the most successful and well-known oil businesses in the world. Its principal activity is crude oil and natural gas exploration and production, as well as the manufacture, trade, and transportation of crude oil, natural gas, petroleum products, and petrochemicals.

It is involved in the upstream as well as the downstream aspects of the oil and gas industry, in addition to the chemical industry.

When considering Exxon, there are certain significant risks to consider that are difficult to measure. While it is unlikely that Exxon will go bankrupt any time soon, its long-term potential is less rosy. In the short term, however, Exxon may be among the best energy stocks because it contains a lot of Value. Whether this will continue into 2023 is, of course, entirely dependent on market developments.

ExxonMobil is putting its future on the line by relying on fossil fuels as governments work to reduce pollution. ExxonMobil still lacks a viable approach for preserving value during the energy transition.

ExxonMobil is involved in the highly competitive energy and petrochemical industries. It faces global competition from both commercial and state-owned enterprises. Of course, you can also invest in energy ETFs, such as a tracker for all oil and gas companies. By doing so, you reduce non-systematic risk from this sector.

best-value-stocks

Energy stock 3. Equinor ASA (EQNR)

 which-energy-stocks-to-buy-in-2022Source: Happy Investors Analysis Q2 2022

Equinor ASA is an energy firm that explores, produces, transports, refines, and markets petroleum and petroleum-derived products, as well as other kinds of energy, in Norway and globally.

It operates through the following segments: Exploration & Production Norway; Exploration & Production International; Exploration & Production USA; Marketing, Midstream & Processing; Renewables; and Other.

The company also transports, processes, manufactures, markets, and trades in oil and gas commodities such as crude and condensate products, gas liquids, natural gas, and liquefied natural gas; markets and trades in electricity and emission rights; operates refineries, terminals and processing plants, and power plants; and develops low-carbon oil and gas solutions.

It also develops wind and carbon capture and storage projects and provides other sustainable energy.

Equinor's main risk is that global demand for oil and gas will reduce operating margins. The Norwegian Ministry of Petroleum and Energy manages the corporation as a state-owned enterprise.

However, the excellent assets it possesses are not sufficient on their own to ensure continued profitability. It is currently facing an unprecedented oil market that is expected to be volatile for a number of years to come.

300x250

Energy stock 4. Gran Tierra Energy (GTE)

 which-energy-stocks-to-buy-right-nowSource: Happy Investors Analysis Q2 2022

Gran Tierra Energy Inc. is an energy firm established in Canada. The Company is primarily engaged in oil and gas exploration and production in Colombia and Ecuador.

Gran Tierra Energy has holdings in producing and prospective projects in Latin America, with a concentration on Colombia and Ecuador. Its portfolio of assets comprises onshore oil reserves and production in Colombia's Middle Magdalena Valley and Putumayo Basin.

Gran Tierra Energy has a large margin of error due to increasing oil prices and a well-laid-off debt position. Gran Tierra necessitates a high level of risk tolerance given Colombia's political uncertainty and substantial long-term debt burden.

Another concern for Gran Tierra is Colombian political upheaval, which has resulted in blockades and output restrictions for the driller in 2021. Although there has been some wiggle room between Colombian leaders and their constituents, we do not believe the country is out of the woods in terms of protests.

Energy stock 5. Falcon Minerals Corporation (FLMN)

 energy-stocks-with-valueSource: Happy Investors Analysis Q2 2022

Falcon Minerals Corp. is a minerals firm that has a significant weighting in the oil industry. The firm owns and purchases core-of-the-core oil and gas minerals with strong growth potential. It also has mineral, royalty, and overriding royalty interests in the Eagle Ford and Austin Chalk formations in Karnes, DeWitt, and Gonzales counties in Texas.

It generates revenue from royalty interests, mineral interests, non-participating royalty interests, and overriding royalty interests in North American oil and gas projects. Leading drillers in the business, including ConocoPhillips, BP, and EOG Resources, are responsible for the drilling operations.

Falcon Minerals pays out a large portion of its earnings and more than half of its cash flow, making it difficult to determine whether the company is reinvesting enough in its business to improve its status.

The dividend that Falcon Minerals pays out has been decreasing at a rate of 12% per year on average over the previous four years, which is not a very encouraging trend to behold.

It's never great to watch earnings and dividends shrink, but at least management has cut the payout rather than risking the company's health to keep it. Not the best dividend investment if you ask us.

Questions or comments about investing in energy stocks? Let us know in the comments below. You can also check the best eToro ETF’s to invest in diversified funds to reduce risks.

About the author
Raised by an entrepreneur, a master's degree in Organizational Science and Strategy, and a passion for investing. My name is Jorik Vermeulen, Founder of Happy Investors . For years I have been sharing my knowledge of long-term investing in stocks and ETFs to help you get started!
Place comment

Happy + Insider

Happy Investors is an official partner of Capitalist Exploits. The Insider membership of Capitalist Exploits helps us to achieve financial freedom. As an Insider member, you get access to high-quality stock research as well as portfolio guidance. Get instant access to 100+ asymmetric investments for minimal risk and potential x5 or more returns. This is an exclusive service for stock investors with 1500+ satisfied members giving a 4.8/5 review. As an official partner we are pleased to offer an exclusive $1000 discount.

stock-research

Stocks & ETF's

Time in the market beats timing the market. Start investing today! Buy stocks 100% commission-free at eToro and build your wealth. Let money work for you, and enjoy life. Don't wait for the perfect moment. Invest for the long term and have patience. Your capital is at risk, so start with lower-risk investments such as bonds, ETF's, dividend stocks, etc. eToro is a good choice for USA investors (to avoid 0,5% currency conversion). 

buy-stocks-long-term

IPO Stocks at Initial Price

At Freedom24, the world largest broker with +40.000 stocks, we can buy IPO stocks at initial price. The average return on investment is approx. 60% for 93 days (no guarantee for future returns). All IPOs are selected by investing experts. Your capital is at risk. Freedom24 is only available for European investors.

ipo-long-term-investments

Crypto & Stock Trading

At NAGA, the world biggest Social Trading and Crypto Trading Platform, you can AutoCopy traders at stocks, crypto and forex. Copy the NAGA 10 most profitable traders. Also, NAGA is known to offer solid platforms to trade crypto and stocks. Other fees may apply and your capital is at risk. NAGA is only available for European traders.

autocopy-traders