Investing in energy stocks can be very hit or miss. Many companies in the energy industry are highly sensitive to commodity prices and supply and demand, factors that can shift unexpectedly, affecting both profits and share prices in the short term in ways investors may not see coming.
However, energy remains one of the most important of humanity’s basic needs. And with humanity growing — the global middle class will expand by 2 billion new members in the two decades ahead — the energy industry is set for big growth ahead, in both fossil fuels and renewables.
Here are three that look worth buying right now…
North America’s biggest supplier of natural gas and biomethane for transportation, Clean Energy Fuels Corp. (NASDAQ:CLNE); diversified oil and gas midstream giant MPLX LP (NYSE:MPLX); and solar technology leader SunPower Corporation (NASDAQ:SPWR).
Keep reading below to learn why these three very different business all meet the “buy now” standard, and which might belong in your portfolio.
The “ready now” alternative fuel provider
Jason Hall (Clean Energy Fuels): In recent years, electric- and hydrogen-powered vehicles have gotten the vast majority of the attention from the media, with companies like Tesla and others proving the viability of non-gasoline or diesel technologies in light-duty transportation. More recently, attention has shifted to medium- and heavy-duty applications, and rightly so, as battery technology and hydrogen fuel cell technologies continue to evolve.
But they’re not exactly road-ready today for most applications, and it’s likely to be years before they are. Further, once they do hit highways, they will be expensive and limited in capability. That’s something many fleet operators are realizing, and it’s leading many to give natural gas a second look.
Clean Energy Fuels’ last two quarters show that this is happening. After reporting 14% fuel delivery growth to close 2018, it just reported 12% growth to start 2019, and management set the tone that continued growth is expected for the rest of the year and beyond.
Moreover, Clean Energy’s future isn’t just as a “bridge fuel” to EVs and hydrogen: Its fastest-growing business is biomethane, which makes up half of its fuel growth and is produced from human-driven waste. The end result is a fuel that works in any trucking or transit application right now, while having a lower total emissions profile than you’d get from an electric vehicle, which may not even be available for another four or five years.
Add in the recent sell-off — shares are down 17% from the 2019 peak, though they’re still up 66% this year — and Clean Energy is a great investment in the growth of alternative fuels in commercial transportation.
High yield but low risk
Matt DiLallo (MPLX): After a challenging 2018, master limited partnerships (MLPs) have bounced back this year. The average one in the Alerian MLP ETF is up about 14%. One notable laggard, however, is MPLX, which has only rebounded around 5% this year. Because of that, it’s one of the most attractive buys in the sector, especially when factoring in its roughly 8% yield.
The company backs that payout with top-tier financial metrics. MPLX not only generates predictable cash-flow-supported fee-based contracts, but it covered its high-yielding distribution by a comfortable 1.33 times last year. Meanwhile, the company has a top-notch balance sheet backed by a conservative 3.9 times leverage ratio, which is below the 4.0 times comfort level of most MLPs.
The company uses its financial strength to…
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