Three Energy Stocks Poised To Double

2020 has been a wild ride for investors in energy infrastructure stocks. A range of factors, including energy demand destruction due to COVID-19, a meltdown of the high-yield investment sectors, and a perception that new, renewable energy technologies, will quickly replace oil and gas usage. 

Energy infrastructure, sometimes called energy midstream, are the services that gather, process, transport, and store energy commodities. The companies in the sector own and operate pipelines, storage terminals, and processing facilities.

Half a decade ago, most midstream companies were organized as master limited partnerships (MLPs). In the current age, there are as many or more companies organized as corporations instead of as MLPs. From my observation, the stock market does not put extra value on one business structure—corporation or MLP—over the other.

Midstream services generate steady fee-based revenues. However, the investing world does not give credit for the stable business results, and share prices can be very volatile.

To illustrate the 2020 stock market cycles for energy infrastructure, let’s look at the Alerian MLP Infrastructure Index (AMZI). The AMZI constituents include the largest MLPs; all focused on providing energy midstream services. Here is the year-to-date chart from the Alerian website.

Here is a quick recap of the swings down and up:

  • From January 16 to the bottom on March 18, the AMZI lost 69% of its value. The February-March crash was part of a larger liquidity event that encompassed all of the high-yield investment sectors.
  • From the March low, the index gained 130% by June 8. Because of the massive earlier decline, the significant gain off the bottom only recovered 60% of the first-quarter losses.
  • For unknown reasons (at least no reasons that weren’t apparent earlier), from June 8 until July 14, the index again dropped, this time by 28%. Ouch!
  • Over the last month, since mid-July, the AMZI has trended steadily higher, gaining 12%.
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Old Time Investor 1 year ago Member's comment

Great picks. I think these stocks are poised to go up dramatically.