Finding the champions of the next calendar year.
With 2016 now nearly in the books, it’s time for investors to turn their focus to the themes that will dominate 2017 and beyond. One of the most notable themes of the past year has been a rally in energy stocks, and as it turns out, that rally looks primed to continue into 2017. As OPEC nations begin ratcheting down on oil production, lower supply should keep a degree of upward pressure on oil prices. The best energy stocks to buy for 2017 should all benefit from a steady or rising price of oil. Here are a few stock picks from the sector that should perform well throughout 2017.
Exxon Mobil Corp. (ticker: XOM)
Exxon was actually named by U.S. News & World Report as one of the best energy stocks to buy for 2016, and it didn’t disappoint: By Dec. 1, XOM stock was up 11.9 percent on the year, far better than the 7.2 percent return of the Standard & Poor’s 500 index. And that’s before the 3.4 percent dividend. Speaking of the dividend, it’s one of Exxon’s finer attributes, rising for 33 consecutive years. With current CEO Rex Tillerson on President-elect Donald Trump’s short list for secretary of state, Exxon will likely have a cozy relationship with the government, which can be good for shareholders.
BP plc (ADR) (BP)
Like Exxon, BP shares aren’t likely to go up or down by 50 percent in a calendar year, which can certainly happen with smaller wildcatters and frackers, whose shares tend to be much more volatile. No, BP is simply one of the most massive major integrated oil and gas companies on the planet. As such, it’s suitable for more conservative investors, especially given its sizable 6.8 percent dividend. It’s true that BP could slash its dividend if it doesn’t boost profits soon, but earnings per share are expected to jump 139 percent in 2017 as industry economics smooth out.
Schlumberger Limited (SLB)
Other than flat-out buying oil and gas producers, what’s the best way to wager on an era of higher oil prices? Buying shares in oil field services companies like Schlumberger isn’t such a bad route to take, and SLB definitely appears to be one of the best large-cap energy stocks to buy for 2017. Its 2016 merger with oil field equipment maker Cameron International should not just “create synergies” that most M&A deals seek to realize, but also defend Schlumberger’s position as the No. 1 oil field services company around. Analysts expect SLB to return to revenue growth in 2017, with EPS expected to roar 67 percent higher.
Energy Transfer Partners LP (ETP)
If the name sounds familiar, it’s likely because you’ve heard it used in association with the Dakota Access Pipeline, the 1,000-plus mile oil pipeline being built to transfer oil from North Dakota to Illinois. An ETP subsidiary is building the pipeline; its route has been the source of much controversy and has been held up by the Army Corps of Engineers. That said, a Trump administration is unlikely to side with protesters, and it wouldn’t be shocking to see the White House remove impediments to the project. ETP, a master limited partnership, is one of the more rewarding dividend stocks, with shares yielding a remarkable 12.3 percent.
Whiting Petroleum Corp. (WLL)
A somewhat more speculative play, this $3.5 billion Denver-based oil and gas exploration company has big upside potential. It owns more than 440,000 acres of oil-rich land in the Williston basin of North Dakota and Montana, including prime real estate in the Bakken formation. WLL spent much of 2016 shoring up its balance sheet, and with decreasing debt, Whiting can now get back to business as usual. Incidentally, the completion of the Dakota Access Pipeline should significantly decrease transportation costs, potentially lowering the break-even cost of oil to $47 per barrel.
Apache Corp. (APA)
Shale driller Apache Corp. also owns some enviable assets, primarily in the Permian and Andarko basins, that make it one of the best energy stocks to buy for 2017. Another major catalyst for these oil and natural gas producers is the dramatic rise in natural gas prices, which, through early December 2016, had ripped 76 percent higher in the previous year. Analysts expect Apache to swing to a profit as revenue grows by 27 percent in 2017. On top of that, two insiders bought APA stock in November around $58 per share, a strong bullish indicator.
Energy Select Sector SPDR (ETF) (XLE)
Some investors don’t want exposure to one or even a handful of the major stocks in a sector. They’d rather buy the sector outright. Well that’s precisely what the Energy Select Sector SPDR ETF offers: diversified exposure to energy stocks. Sure, it’s not technically a stock itself, but it trades like one, and if you believe in the sector as a whole it’s the most straightforward way to invest in it. XLE tracks the performance of energy stocks in the S&P 500, and pays a 2.3 percent dividend to boot. The expense ratio of just 14 basis points is far lower than the majority of ETFs.
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The Best Energy Stocks to Buy for 2017 originally appeared on usnews.com
