Investing in oil stocks provides investors with an opportunity to gain exposure to the oil sector. It also provides investors with the ability to potentially profit from the price movements of oil. Oil stocks refer to shares in companies that are involved in various aspects of the oil industry, including exploration, production, refining, and distribution.
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Oil and gas stocks are cyclical investments, so they enjoy soaring profitability and cash generation in times of increasing prices for crude oil and gasoline. Much of the oil market is dominated by existing industry juggernauts with robust infrastructure already in place, making their sector leadership and demand for oil and gas products difficult to usurp. As such, oil and gas stocks tend to be large dividend payers with a long history of operational excellence and higher-than-average payouts, making them ideal plays for income-seeking investors.
Most automakers already have long-term plans to phase out their internal combustion engine designs in favor of electric vehicles. As more EVs make their way to market, the demand for oil and gas could potentially decline. You might consider stocks in the automotive industry as a play on that trend.
Oil and gas stocks can be a fantastic place to invest in times of rising oil prices and relative geopolitical stability for their operating leverage, impressive cash flows, and juicy dividend payouts. But those times can be difficult to predict, and you would also do well to consider the risks of investing in oil and gas stocks before you take the plunge.
Oil stocks refer to stocks of companies that are involved in the exploration, extraction, refining, and distribution of oil and gas. These companies can be involved in a variety of activities. This includes drilling for oil and gas, operating pipelines, and refining crude oil into finished products like gasoline and diesel fuel.
Investing in oil stocks can be a potentially lucrative endeavor. This comes as the demand for energy has consistently remained high and oil prices can be volatile. Which provides opportunities for price appreciation. However, investing in oil stocks also carries a certain level of risk. This is because the value of these stocks can be affected by a variety of factors. For example changes in oil prices, economic conditions, and political developments. With this in mind, here are three oil stocks for your 2023 stock market watchlist.
The big picture of oil stocks is messy. In recent years, the advancements made by clean energy created long-term questions about the future of oil stocks. As of now, oil is still an essential resource for energy production.
ESG stands for environmental, social, and governance. Investors that opt for this strategy choose stocks that prioritize sound environmental practices. One of the ways investors prioritize the environment is by investing in clean energy technology instead of oil companies.
Throughout 2022, oil stocks have seen an upward trajectory. Many attributed these rising prices partly to the war between Russia and Ukraine. However, crude oil prices have dropped quite a bit from their high point earlier in the year.
Oil stocks might be the right fit for your portfolio goals. Nevertheless, the heightened volatility might mean you must keep a closer eye on industry changes to make the necessary portfolio adjustments.
Our artificial intelligence scours the markets for the best investments for all manner of risk tolerances and economic situations. Then, it bundles them up in Investment Kits that make investing simple and strategic.
After trading in a tight range for the last three months oil prices look like they are breaking out. A rally in oil will have many significant implications. Of course, the stocks of energy companies will benefit, as with high oil prices come higher margins, but there is more to it than that. If oil prices rise significantly, it will have a strong effect on CPI and inflation.
A hot inflation print, boosted by energy prices, would be very bad for policymakers and the market. It may also cause a feedback loop, where higher inflation will also increase demand for energy stocks which have acted as a haven during periods of inflation. Either way energy stocks look like a good place to be.
Another way to identify good stocks is to look for relative leaders within sectors. Marathon Petroleum (MPC Quick QuoteMPC - Free Report) is the best performing stock in the (XLE Quick QuoteXLE - Free Report) Energy ETF. Up 12% over just the last month it has more than doubled the second-best stock in the fund.
Vista Oil and Gas is one of the best performing stocks in the market, dramatically outperforming both the industry and broad market. VIST has a Zacks Rank #2 (Buy), indicating an upward earnings revision trend.
At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors. This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system. Since 1988 it has more than doubled the S&P 500 with an average gain of +24.52% per year. These returns cover a period from January 1, 1988 through February 6, 2023. Zacks Rank stock-rating system returns are computed monthly based on the beginning of the month and end of the month Zacks Rank stock prices plus any dividends received during that particular month. A simple, equally-weighted average return of all Zacks Rank stocks is calculated to determine the monthly return. The monthly returns are then compounded to arrive at the annual return. Only Zacks Rank stocks included in Zacks hypothetical portfolios at the beginning of each month are included in the return calculations. Zacks Ranks stocks can, and often do, change throughout the month. Certain Zacks Rank stocks for which no month-end price was available, pricing information was not collected, or for certain other reasons have been excluded from these return calculations.
The oil and gas industry has been dealing with monumental challenges since the onset of the pandemic. As global energy demand saw unprecedented declines and the clean energy narrative picked up steam, many investors headed for the exit doors in some of the historically best-performing oil stocks. With that said, it seems as though the rumors of the oil industry's demise have been overstated for now, as oil prices have rebounded sharply in 2021. Brent topped $72 a barrel for the first time since 2019 on Friday, which is a great sign for companies involved in providing the equipment and technology needed in the oil & gas industry worldwide. While many of these companies still face long-term challenges, there's a good chance that the rally in oil prices has room to run in the coming months as the world continues to reopen. If you are interested in one of the best ways to play this trend, check out our list of 3 oil services stocks to buy now below. Schlumberger NV (NYSE:SLB) This is a global provider of oilfield services to the energy industry that recently delivered positive news after the company's announcement that its 2021 estimated revenues would top $22.5 billion, which is above the consensus analyst estimate. As a major provider of the technology needed for reservoir characterization, drilling, production, and processing to the oil and gas industry, Schlumberger plays a key role in supplying the products needed to keep end-to-end upstream operations running at full steam. It's also worth noting that the company has a strong international business that has quickly stabilized, which could lead to a nice rebound in earnings for the rest of the year. To quote CEO Olivier Le Peuch, "With oil demand projected to reach pre-2019 levels by the end of 2022 and supply tightening, our oil and gas business is on the verge of an exceptional growth cycle,". This is exactly the type of statement that investors should be excited about, and the fact that Schlumberger reported operating results that were much better than expected in Q1 could be a sign of good things to come. Halliburton Company (NYSE:HAL) Next, we have Halliburton, the world's second-largest oilfield services company and a great option for investors that are interested in stocks that should benefit from rising oil and gas prices. Halliburton operates in two segments, the completion and production segment and the drilling and evaluation segment. This company helps oil and gas companies around the world with locating new drill sites, wellbore engineering, and optimizing well construction activities. As the demand for oil continues to improve, oil and gas companies will be more willing to increase their spending, which plays exactly into Halliburton's favor. The company reported a sequential revenue increase of 7% in Q1, which is certainly a step in the right direction. It's also worth noting that the company's operating margins are still above pre-pandemic levels, which is a testament to how skillfully the company navigated one of the more challenging times for the industry in recent memory. The bottom line here is that Halliburton is one of the premier oil services stocks to buy now given its operating efficiency and the potential for a rebound in the North American oil industry. Baker Hughes Co (NYSE:BKR) If you are interested in an oil services company that has growth opportunities outside of traditional oil drilling, Baker Hughes is a strong pick. With exposure to hydrogen, liquefied natural gas, carbon capture, and more, which are all growing areas that have huge addressable markets, Baker Hughes has a longer-term energy transition strategy that could pay off in a big way. The company also provides oilfield products, services, and digital solutions to oil & gas companies around the world and was formed from the merger of Baker Hughes Inc. and GE's oil and gas business back in 2017. Income investors should be attracted to this stock thanks to its 2.78% dividend yield, which is the highest dividend yield out of the oil services stocks mentioned in this article. It's also worth mentioning that since Baker Hughes has access to GE Digital, it might be able to leverage Big Data and the Internet of Things to benefit the oil and gas industry. The stock has rallied 15% in the past month and could be in for more upside as long as oil and gas prices are rising. 781b155fdc