Why Are Energy/Gas & Oil Stocks Hot Right Now?

The Energy, Gas, and Oil industry has been the hottest sector on Wall Street in the past year. Most of these types of companies focus on the exploration, production, and marketing of oil, gas, and renewable resources.

In fact, ExxonMobile and Chevron are among the industry’s biggest players.

Energy stocks, as represented by an exchange traded fund (ETF) have dramatically outperformed the broader market.

My Stock Recommendations

Let’s take a look at our first stock recommendation: XLE (Energy Select Sector ETF) has posted a total return of 61.32% over the past 6 months. Some of their top holdings are: ExxonMobile, ConocoPhillips, and Marathon Petroleum.

Oil prices are heavily affected by the war in Ukraine. As oil supplies tightened, energy stocks rose. It may be tempting to purchase oil stocks due to the turmoil in the oil market and the recent rise in the barrel price, but remember that the main reason that oil is moving so much is due to war, which is hard to predict.

The next stock recommendation on the radar is: PDCE (PDC Energy, Inc) is up 83% from 1 year ago. Headquartered in Denver, Colorado, PDC Energy is an independent exploration and production company in which acquires, explores for, develops, and produces crude oil, natural gas, and natural gas liquids in the United States.

Energy stocks are highly influenced by geopolitical shifts. Since the stocks largely trade off the price of crude oil, their earnings and share price may shift dramatically with little notice and sometime contrarily to the market as a whole.

Brent crude oil prices have jumped to more than $110 per barrel. That’s the highest level since 2014. There are projections that a barrel of crude oil could surpass $140 per barrel.

So, there are two reasons why my final recommendation is one of my all-time favorite stocks: 1) the exponential rise in its stock price in the last few years and 2) the expected price of a barrel of crude oil could continue to increase significantly. UCO (Proshares Ultra Bloomberg Crude Oil ETF) has posted a 141% return since the beginning of this year. It was trading around $177 per share earlier this month (June 2022) but it has since split its share price 4-for-1. The current price as of this article is $53.39.

The Bottom Line

People will always use and need energy. The Russian invasion of Ukraine sent shockwaves through the energy market, but due to a rise in gas prices and energy costs, some companies look poised to be worthwhile investments, even if their share price has risen considerably in the first half of 2022.

*** I have a bonus stock recommendation for you that I just couldn't leave out. XOP (SPDR S&P Oil & Gas Exploration ETF) has simply been on a tear! It is up 70% since January 2022. Incredible! This ETF holds some of the top gas/energy companies in the U.S.