One of the most notable themes in 2016 was a rally in energy stocks; while that rally’s taken a break in the early months of 2017, the dynamics are still in place for a continued rally throughout the rest of the year.
OPEC agreed to cut production late last year, and as OPEC nations continue ratcheting down, 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 the rest of 2017.
[Read: The 10 Most Anticipated IPOs of 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. Assuming reinvested dividends, XOM stock had posted a 19.9 percent gain by year’s end, far better than the dividend-adjusted 9.5 percent return of the Standard & Poor’s 500 index. Part of Exxon’s appeal is its dividend, one of Exxon’s finer attributes, which has risen for 34 consecutive years.
With former CEO Rex Tillerson now the secretary of state for President Donald Trump, one might assume Exxon will have a cozier relationship with the government, which would almost certainly be good for XOM 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 seeking robust dividend stocks, especially considering its sizable 7 percent yield. It’s true that BP could slash its dividend if it doesn’t boost profits soon, but earnings per share are expected to jump 157 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 54 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.
[See: The 25 Best Blue-Chip Stocks to Buy for 2017.]
An ETP subsidiary is building the pipeline; its route has been the source of much controversy and was originally held up by the Army Corps of Engineers in the late days of Obama. That said, the Trump administration reversed that decision in a matter of months, and the pipeline should begin transporting oil as soon as April. ETP, a master limited partnership, is one of the more rewarding dividend stocks out there today, with shares yielding a remarkable 11.8 percent.
Whiting Petroleum Corp. (WLL). A somewhat more speculative play, this $3.4 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, making 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 April 2016, had ripped 20 percent higher in just a year. Analysts expect Apache to swing to a profit as revenue grows by 24 percent in 2017.
After a 20 percent pullback in the stock price in the first three months of the year — due largely to a secular decline in short-term oil prices — APA could be approaching fire sale prices.
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.
[See: 7 of the Best Cheap Stocks to Buy Under $10.]
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 2.4 percent dividend to boot. The expense ratio of just 14 basis points makes it one of the best ETFs in its space affordability-wise: the category average is 48-basis-points.
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7 of the Best Energy Stocks to Buy for 2017 originally appeared on usnews.com
