Oil companies had to contend with weaker demand for the part of 2020, which brought their inventories down to their lowest level in 52 weeks. Stocks rebounded with soaring crude oil prices in 2021, with increased demand and extremely cold temperatures in the United States, as Brent prices recently hit over $ 65 a barrel – the first time in over 12 months.
As energy stocks rebound, some of them are good additions to the portfolio as they have higher free cash flow and lower debt levels. Crude oil prices may be less volatile in 2021, as the outlook for the energy market is positive as the economy recovers, says Michael Underhill, director of investments at Capital Innovations in Pewaukee, Wisconsin.
The US Energy Information Administration expects the share of renewables in the power generation mix to increase from 21% in 2020 to 42% in 2050. Wind power and solar power generation are responsible for most of this growth will come from companies like Exxon Mobile Corp. (Ticker: XOM) and Royal Dutch Shell (RDS.A). Here are seven of the best energy stocks to buy.
Chevron Corporation (CVX)
Chevron maintained a generous dividend yield of 5.43%. The oil giant acquired Noble Energy, another oil producer, in a deal worth $ 5 billion for all shares last July. Robert Johnson, professor of finance at the Haider School of Business at Creighton University in Omaha, Nebraska, says Chevron exhibits many of the attributes of classic value stocks.
It sells at 1.84, which is well below the S&P 500 price/sell ratio of 2.88, and it also sells at its price/book ratio of 1.36, which is about a third of the market and indicates its price/price. accounting ratio of 4.27. “Chevron got the seal of approval from Warren Buffett,” adds Johnson. “Berkshire Hathaway’s stake in CVX was increased during the last quarter. In fact, it is Berkshire Hathaway’s tenth-largest stake (BRK.A, BRK.B) with 1.52% of the portfolio. ”
Sunkor Energy (SU)
Another choice of billionaire Warren Buffett is Suncor Energy, one of Canada’s largest integrated energy companies, operating in Canada, the United States, and the North Sea. Despite being one of Berkshire Hathaway’s smallest holdings, at 1.3%, it is in the Oracle Omaha portfolio, Johnson says. The company also exhibits value play characteristics with a dividend yield of 3.48%, price-to-sales ratio of 1.48, and a price-to-book ratio of 1.02.
Suncor reported fourth-quarter operating funds of $ 1.22 billion, with an operating loss of $ 142 million. The company has reduced its annual operating costs by $ 1.3 billion, or 12%, in 2020, from 2019 levels, and plans to pay off $ 1 billion in debt to $ 1.5 billion and to repurchase between $ 500 million and $ 1 billion of the company’s shares in 2021.
Magellan Partners Midway (MMP)
Magellan Midstream Partners, a refined products and pipeline operator, reported a fourth-quarter net income of $ 183.9 million, compared to $ 286.4 million for the fourth quarter of 2019. The decline is attributed to the declining in demand for refined products amid pandemic and declining commodity prices Low volumes and average pipeline prices. Magellan had $ 5 billion in debt and $ 13 million in cash as of Dec.31, 2020.
The company’s stock remains a good buy and a “safe” addition in the mid-market, says Charles Sizemore, a chief investment officer. investments at Sizemore Management head, money in Dallas. Magellan also offers a dividend yield of around 10%, with a good balance sheet and low leverage.
Enterprise Product Partners (EPDs)
Enterprise Products Partners, a diversified energy infrastructure operator, reported a net income of $ 3.8 billion for 2020, compared to $ 4.6 billion for 2019. Net income for 2020 and 2019 was reduced due to the decrease in asset values and related costs of $ 891. Millions of US dollars.
The company’s free cash flow increased 8% to $ 2.7 billion for 2020. EPD provides a dividend yield of 8.35%. “In a market that is starting to bubble, pipeline operators are one of the last sectors to look unequivocally cheap,” Sizemore says.
“The new Biden administration is less ‘energy efficient’ than the Trump administration was, but that’s not necessarily bad for better-quality operators like EPD. A tighter operating environment can be a death knell for some of the weaker operators, which have been hanging by a thread in recent years. However, this creates opportunities for the more powerful players to increase their market share and possibly buy assets of high quality at low prices. ”