Wall Street's Preferred Energy Stocks as Oil Prices Rally
Oil prices have recently reached their highest level in almost a year, prompting investors to seek opportunities in the energy sector. With that in mind, here are some energy stocks that offer significant long-term upside potential. Energy stands out as the sole winning sector in the S&P 500 this month, boasting gains of approximately 2.6%. This week alone, the sector has seen a 0.5% increase as oil prices surged due to extended voluntary oil supply cuts from Saudi Arabia and Russia until year-end. CNBC Pro analyzed FactSet data to identify energy companies in the S&P 500 that not only stand to benefit from rising oil prices, but are also favored by analysts.
Top Energy Stocks
Among the energy stocks that made the cut, Marathon Oil and Targa Resources, a Texas-based natural gas infrastructure company, emerged as clear winners within the broader index. Analysts project a 21.5% upside for Marathon Oil and a 20.5% upside for Targa Resources. Nearly two-thirds of analysts rate Marathon Oil as a buy, and the stock has already gained nearly 17% this quarter. Halliburton follows closely behind Targa Resources, with 80% of analysts recommending the oilfield services giant as a buy. Halliburton has achieved gains of over 24% this quarter, making it the top performer on the list.
Additional Promising Stocks
Diamondback Energy, an oil and natural gas company, also garners attention, with approximately 77% of analysts rating the stock as a buy. The average price target implies an upside of more than 11%, and shares have already risen by about 18% this quarter. Moreover, Diamondback Energy's subsidiary, Viper Energy Partners, recently announced a significant acquisition of mineral and royalty interests, expanding the company's presence in key basins.
Other Wall Street Favorites
In addition to the aforementioned stocks, Wall Street also favors natural gas producer EQT, oil and gas giant EOG Resources, and petroleum refining and marketing company Valero Energy. Analyst Nitin Kumar from Mizuho Securities highlighted Valero and EQT as "key picks" in a June note, noting their strong performance within their Energy Investment Framework. Over 62% of analysts have given EQT a buy rating, expecting an upside of almost 15%. While EQT's gains this quarter have been modest, it leads the list in terms of year-to-date gains, up approximately 24% in 2023.
For investors seeking exposure to the energy sector without betting on individual stocks, the Energy Select Sector SPDR Fund (XLE) and the iShares U.S. Energy ETF (IYE) track companies in the sector. XLE has an expense ratio of 0.1% and a total return of over 6% in 2023, while IYE carries an expense ratio of 0.4% and has a total return of 4.6% year to date.
In summary, as oil prices rally, Wall Street shows a preference for certain energy stocks that have the potential for significant growth. Investors should carefully consider these options and the broader market trends when making investment decisions in the energy sector.
Conclusion: Implications for New Businesses
This oil price rally and Wall Street's preference for certain energy stocks provide a 'hot take' for new businesses, particularly those in the energy sector or those considering investments in this area.
Investment Opportunities
The rise in oil prices presents potential investment opportunities. Stocks such as Marathon Oil, Targa Resources, and Halliburton have shown significant growth potential, making them attractive options for businesses looking to diversify their investment portfolio.
Understanding Market Trends
Understanding market trends is crucial for new businesses. The current trend of rising oil prices and the resultant growth in the energy sector underlines the importance of staying informed about market dynamics. It also highlights the need to adapt business strategies in response to these trends.
Considering Broader Market Exposure
For businesses not wanting to invest in individual stocks, options like the Energy Select Sector SPDR Fund (XLE) and the iShares U.S. Energy ETF (IYE) offer broader exposure to the energy sector. These options could provide a less risky way for businesses to benefit from the current oil price rally.
In conclusion, the current oil price rally and the resulting growth in the energy sector offer potential opportunities for new businesses. Whether through direct investment in energy stocks or broader market exposure, businesses can leverage these trends to their advantage. As always, businesses should stay updated on market trends and make informed decisions based on their specific needs and risk tolerance.
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