Can Energy Stocks Win Again In 2023?


Image Source: Unsplash

Energy has been the best-performing sector in the S&P 500 in 2022. It also held that title in 2021. Can energy keep its crown 3 years in a row?

Many traders are dubious. Energy stocks have already weakened in Dec 2022 as crude and natural gas prices have eased from recent highs.

But energy stocks are still cheap, on a P/E basis, and free cash flows are still elevated with WTI crude over $65. It’s been trading over $70 the last six months.

But will all energy stocks rise, as they have been in the last 2 years? Or will one part of the industry rise above the rest?

5 Ways to Invest in Energy Stocks in 2023

1.       Energy Select SPDR (XLE - Free Report)

The XLE is one of the top energy ETFs. It was created in 1998, at the start of the last energy bull market. The XLE has 22 holdings across all aspects of the industry from the producers, to refiners, marketing, and the integrated oil companies.

Exxon Mobil and Chevron are the two largest holdings and make up 42.58% of the total portfolio. If you want a big position in the two largest integrated oil companies in the United States, then the XLE is for you.

Shares of XLE are up 51% year-to-date and over the last 2 years are up 104%.

It has an expense ratio of 0.1% and currently pays a dividend yielding 3.4%.

Should investors still be buyers of XLE in 2023?

2.       Exxon Mobil Corp. (XOM - Free Report)

Exxon Mobil is a large integrated oil company. The integrated oil companies have a Zacks Industry Rank in the top 27%.

Shares of Exxon Mobil are up 71% year-to-date but are still cheap, on a P/E basis. Exxon Mobil has a forward P/E of just 7.5.

However, earnings are expected to decline 21.4% next year after 2022’s big year.

Is it too late to buy Exxon Mobil?

3.       Valero Energy Corp. (VLO - Free Report)

Valero is a refiner. The refining industry has a Zacks Industry Rank in the top 18%.

Shares of Valero have been on a tear in 2022, gaining 54% year-to-date. It’s still dirt cheap, however, with a forward P/E of just 4.3.

Earnings have soared in 2022, with analysts expecting them to jump 894% to $27.95 from just $2.81 last year. But in 2023, earnings are expected to fall 29%.

Valero pays a dividend, yielding 3.3%.

Should investors consider the refiners in 2023?

4.       Schlumberger Ltd. (SLB - Free Report)

Schlumberger is in oil field services globally. Oilfield services has a Zacks Industry Rank in the top 9% of all Zacks industries. It ranks 23 out of 250 industries.

Shares of Schlumberger are up 64% year-to-date but the stock isn’t as cheap as some of the others. It trades with a forward P/E of 24.

However, earnings are still expected to be on the rise. Earnings are forecast to rise 67.9% in 2022 and another 40.6% in 2023 as producers ramp up oil and natural gas production next year.

Should oil field service companies like Schlumberger be on your shortlist?

5.       EOG Resources, Inc. (EOG - Free Report)

EOG Resources is an exploration and production company. The E&Ps no longer have a high Zacks Industry Rank. The E&P industry ranks in the bottom 32%, or 172 out of 250 industries.

Shares of EOG Resources are up 38% year-to-date but have weakened over the past month, falling 17% during that time. EOG Resources is still cheap, with a forward P/E of just 9.

Earnings of the producers are directly correlated to the price of oil and natural gas, both of which have come down in recent months. Analysts expect EOG Resources earnings to grow just 5% in 2023.

Is the recent weakness in EOG Resources a buying opportunity in the stock?

More By This Author:

Screening For High Quality Cheap Tech Stocks
Bear Of The Day: PulteGroup
Buy This Stock, Instead Of That One

Disclaimer: Neither Zacks Investment Research, Inc. nor its Information Providers can guarantee the accuracy, completeness, timeliness, or correct sequencing of any of the Information on the Web ...

How did you like this article? Let us know so we can better customize your reading experience.


Leave a comment to automatically be entered into our contest to win a free Echo Show.