3 Top Energy Stocks to Buy Right Now – The Motley Fool
Today's great discoveries in the energy space can be tomorrow's folly. With energy prices constantly changing – and the energy landscape itself in flux – it is difficult to know what should make up better than the energy stores.
With that in mind, we approached three of our Motley Fool contributors and asked which energy stocks they find worth buying right now for investors who have no risk in the portfolio. They chose Tellurian TPI Composites (NASDAQ: TPIC) and Occidental Petroleum (NYSE: OXY) . That is why, despite the risk, they believe these stocks can be major investments.
Some energy industry stocks are risky than others.
Tyler Crowe (Tellurian): 201[ads1]9 will be the year in which we find out if Tellurian will live up to its promise of being an incredible investment opportunity. The company will build a massive liquid liquid natural gas (LNG) export facility on the Gulf Coast of the United States. Everything comes down to some decisions this year that will determine how well investors will do with this still speculative share.
The basic idea of how Tellurian will make money is certainly there. Natural gas production across the United States is expected to grow significantly, and US gas prices are well below benchmark prices worldwide. In some shale basins such as the Permian Basin, natural gas production surpasses the pipeline and process capacity to the point some producers pay to have it removed instead of burning it at the wellhead. With cheap, abundant gas, LNG exporters have the opportunity to kill. Tellurian estimates of current gas prices in the US and abroad will generate about $ 8.55 per share in annual cash flow – more than what the stock is trading for today.
Tellurian has already received all the permits it needs from regulatory agencies and now appears to lock some commercial partners to pay for facility construction. The company expects to make a final investment decision later this year. There will still be many challenges for Tellurian in the way that can make this stock look much less appealing, but if things go according to plan then investors can look at a multi-bagger.
A high risk chance of owning 25% of the wind market
Rich Smith (TPI Composites): I'll admit right from the beginning: I'm more than a little nervous about this call today. That said, I would still go on a limb and recommend the wind turbine blade manufacturer TPI Composites as a top energy stock to buy right now – with "right now" defined as "before 2020".
Why am I nervous and why can this still be the right conversation to do? Consider TPI's latest quarterly report, which my Fool.com colleague Neha Chemaria declined for us earlier in May. Turnover increased by 18% in Q1 2019, and invoiced sales increased by 25%, suggesting continued strong growth in demand for wind power. The management predicted that the TPI would double its revenue to $ 2 billion annually by 2021, and could command as much as 25% market share in turbine blades.
Nevertheless, a combination of material shortage, labor force in Mexico and a bankruptcy could cause TPI to miss estimates in Q1, reporting a $ 0.35 loss per share – and reversing a promised 2019 – surplus to predict instead as much as a loss of $ 0.09 per share
So where is the opportunity in all this? 2019 is becoming another miserable year for TPI, and its share price – down 18% over the past year to $ 22 per share – reflects that. next year, however, analysts predict that the TPI will return $ 2.20 per share, which at current prices goes to a P / E ratio of 10. For a stock pegged for a 35% annual growth rate over the next Five years it seems to be a very cheap price.
If that is, profits return next year as promised.
Worth a look for a beatdown
John Bromels Occidental Petroleum): Sometimes it just doesn't seem like the right time to buy a company. And just after a company made a big deal leaving investors and analysts who split their heads, asked, "What were they thinking ?" is probably one of those occasions. But in line with these high-risk alternatives, it can now be time to obtain a few shares in Occidental Petroleum.
Occidental fell only Chevron into a bidding war to buy Anadarko Petroleum (NYSE: APC) but it may have been a pyrrhic victory. While Chevron offers $ 62 per share for Anadarko – already a premium to Anadarko's price of under $ 50 per share – Occidental came in with a bid of $ 76 per share, which many believe was too steep a price. To make that bid, Occidental had to secure funding from Warren Buffett and it didn't come cheap.
Occidental's share price has taken 25% haircut since April when all of this has played out, and investors have signaled that they are not satisfied with the deal. But the pummeling has beaten its valuation to just 9.3 times earnings, a 10-year low. It has also increased the yield to a juicy 6.3%. At this price, Occidental is definitely worth considering.
And it's not like Occidental got anything in the deal. Anadarko is one of the largest Permian Basin manufacturers, and with several midfielders working hard on pipelines and export terminals to bring Permian oil and gas to the market, the big Permian position could pay big dividends for investors buying now. But I would repeat that this is not a slam and there is a great risk if – for example – oil prices go into another sustained decline or promised Permian infrastructure does not materialize as planned.
But right now, although it seems overpaid for Anadarko, Occidental Petroleum itself can be sold.
