No matter where oil prices go from here, these seven energy stocks to buy make for great long-term holdings
Antero Resources (AR): A great stock to buy if you’re bullish on natural gas prices staying high in the long-term.
Chevron (CVX): An oil giant smartly putting its profits to work through an increased stock buyback program.
Enbridge (ENB): This Canada-based pipeline owner is a great “safe and steady” energy play.
Kinder Morgan (KMI): Like ENB stock, KMI stock offers a high-yield, and the potential for steady returns.
Marathon Oil (MRO): Its aggressive share repurchase plan could continue to move the needle.
Occidental Petroleum (OXY): Be like Buffett, and make OXY stock your bet on oil prices staying high.
ExxonMobil (XOM): Future upside doesn’t hinge solely on rising oil prices.
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As crude oil prices remain over $100 per share, you may be on the lookout for energy stocks to buy. With sell-side firms like JPMorgan anticipating oil prices to stay near current levels, the industry is set to have a banner year in terms of profitability.
Better yet, oil prices could continue to climb throughout the year. The Russia/Ukraine conflict, which sparked this year’s price spike, is far from over. Already sanctioning Russia, the West could raise the stakes further, with an European Union (EU) embargo on Russian oil. Tightening supply, all while demand recovers from the pandemic, we could see another price spike.
But beyond just the short-term, you may want to consider having several long-term holdings from this sector in your portfolio. No matter where oil prices go from here, these seven energy stocks to buy could result in solid returns, through both dividends and price appreciation:
Energy Stocks to Buy: Antero Resources (AR)
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Before diving into energy stocks primarily in the crude oil space, let’s look at one mostly involved in the exploration and production (E&P) of natural gas. Antero Resources (NYSE:AR) has heated up in price so far this year. Since January, it’s up 88.8%, thanks mostly to natural gas prices more than doubling year-to-date.
Given it’s been sparked by the chaos in Europe, you may think high prices will be short-lived. However, natural gas prices could remain high longer-than-expected. That’s good news for AR stock. Today, it trades for just 6.7x this year’s estimated earnings. It’s still priced as if high natural gas prices will be a “one and done” event.
If this fails to be the case, and natural gas stays high for much longer than a few months, shares could continue to make their way to prices not seen in nearly a decade (over $60 per share).
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Like other integrated energy (E&P and refining) plays, shares in Chevron (NYSE:CVX) have not only made up for their pandemic-era losses. The stock today trades for well above what it traded for a little over two years ago.
Barring another epic spike in crude oil prices, the early 2022 run-up of CVX stock may not repeat itself. However, that’s not to say you can’t buy now, and still see solid returns over a long timeframe. This energy giant is smartly putting its earnings to work, doubling its stock buyback plan from $5 billion to $10 billion per year.
Add it its dividend (forward yield of 3.53%), and return of capital alone could provide you with solid, steady returns. That’s not all. Cutting capital spending to lock in cash flow growth, it’s also made a big acquisition in the renewable fuels space. These moves could also pay off for Chevron investors.
Energy Stocks to Buy: Enbridge (ENB)
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If you’re looking for “safe and steady” energy stocks to buy, midstream (oil and gas pipeline) plays may be an area to focus on. One in particular you may want to consider is Enbridge (NYSE:ENB).
As my InvestorPlace colleague Ian Bezek discussed back in March, midstream names like Enbridge own what are considered “toll road” assets. No matter the price of oil and gas, these companies get paid the same amount. This stability is what enables this Canada-based pipeline owner to produce steady earnings, and more importantly, steady dividends.
At today’s prices, ENB stock has a forward yield of 6.28%. If consistent portfolio income is more your speed, as opposed to something heavily exposed to a potential further rise in energy prices, you may want to consider this stock. Especially since it’s cooled off in price since April, after surging during the first few months of 2022.
Kinder Morgan (KMI)
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Alongside Enbridge, Kinder Morgan (NYSE:KMI) is another midstream energy stock to consider. A diversified owner/operator of pipeline assets, it too offers investors steady earnings, and a high forward-dividend yield (5.99%).
Furthermore, there’s been an increase in the KMI stock cash dividend five years in a row. Average annual dividend growth over the past five years has been 16.81%. Besides providing consistent income to its investors, the company is also working on ways to increase its profitability.
For example, note its pursuit of compression expansion opportunities on both the Permian Highway and Gulf Coast Express pipelines. Compression expansion will enable capacity of its existing assets. Like Enbridge shares, Kinder Morgan shares have experienced low double-digit price appreciation. This may pale in comparison to the high gains seen with other types of oil and gas investments. Again though, if you prefer to invest conservatively, KMI is another great opportunity.
Energy Stocks to Buy: Marathon Oil (MRO)
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As an E&P pure play, Marathon Oil (NYSE:MRO) experiences more wild swings than, say, its former corporate parent, refining giant Marathon Petroleum (NYSE:MPC). Yet while it can make big moves higher (or lower), depending on crude oil prices, if you’re bullish that oil will stay high in the years ahead?
You may want to make MRO stock a long-term holding. Trading for just 5.7x this year’s expected earnings, this is another situation where the market is pricing in high oil prices as a one-time event, rather than something that could carry on longer-than-expected.
If the price of oil stays high, or at worst only dips slightly from current levels, shares could move higher on a re-rating. Not only that, if oil prices stay high, and Marathon’s cash flows stay high, it will likely continue to aggressively buy back stock, as part of its $10 billion stock repurchase plan.
Occidental Petroleum (OXY)
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High oil prices aren’t the only reason why Occidental Petroleum (NYSE:OXY) has been making headlines this year. The continued buying of shares by legendary investor Warren Buffett has also kept this large energy company in the spotlight.
As you may know, Warren Buffett’s Berkshire Hathaway (NYSE:BRK.A,NYSE:BRK.B) helped finance its takeover of Anadarko Petroleum in 2019, by buying $10 billion worth of preferred stock. This year, though, it’s been OXY stock itself, not preferred shares, that the “Oracle of Omaha” has been gobbling up.
Why has Buffett only now decided to bet big on Occidental, considering it’s already surged six-fold since crashing in 2020? Good question. The answer is not definite, but many have speculated that Buffett is bullish on long-term oil prices. Given the size of Berkshire, the best way for him to bet on them moving higher is to buy into a large, established oil company like this one.
Energy Stocks to Buy: ExxonMobil (XOM)
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At first glance, it may look like it’s too late to buy ExxonMobil (NYSE:XOM). Like with some of the larger energy stocks listed above, the stock has already recovered from its 2020 losses, and then some.
Even so, that doesn’t mean now’s a bad time to enter a long-term position. As I argued last month, further upside with XOM stock doesn’t hinge solely on oil prices moving higher. Other moves this venerable oil and gas behemoth has made in recent years could also pay off for shareholders. These moves include better capital allocation, as well as cost-cutting measures.
ExxonMobil is also solid when it comes to return-of-capital effort. Shares currently sport a forward dividend yield of 4.14%. The company also plans to buy back $30 billion worth of shares by the end of 2023. Put it all together, and there’s a strong chance it will deliver more-than-satisfactory returns in the years ahead.
On the date of publication, Thomas Niel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.