Now that oil is on the upswing, the market is rife with opportunities. Oil and gas stocks beyond the industry’s power players are poised to make a bull run. Investors who take a close look at the market will find plenty of opportunities aside from the Exxons, Chevrons and Valeros.
Genie Energy, TC Energy, Enbridge and Pembina represent somewhat hidden oil and gas opportunities every investor should seriously consider. Here’s why.
Though crude prices crashed earlier this year, some oil and gas stocks held fairly steady. ENB is one of those stocks, primarily because it is not overly reliant upon the oil patch. ENB contracts provide protection against inevitable undulations in oil pricing and volume.
It appears as though ENB will reach its cash flow forecast for the year, bringing in enough revenue to cover its 7.14% dividend. Furthermore, ENB’s expansion program is also likely to continue as planned.
Add in the fact that ENB has a healthy balance sheet and investors have all the more reason to consider scooping up shares. It is quite possible ENB will provide annual returns upwards of 15% in the years to come.
Look for ENB to move toward the average analyst price target of $29.31 in the months ahead.
Pembina Pipeline (PBA)
Wouldn’t it be nice to have a stake in the oil and gas industry with 90% of revenue stemming from fees combined yet have minimal exposure to commodity prices?
How about 70% of the aggregate revenue stemming from take or pay deals? In plain English, such an arrangement means customers are required to pay for contracted services regardless of whether those services are used. This is PBA’s business model.
Though there is certainly risk when PBA customer finances decline, more than three-quarters of the company’s customers have either a split investment grade or investment grade credit rating. PBA’s minimal debt combined with solid revenue streams and strategy to defer a billion dollars in capital spending to 2021 essentially puts the company in the catbird seat.
The icing on the cake is PBA’s “A” rating in the Peer Grade component of the POWR Ratings. Buy this stock, hold it for a year and you stand a good chance of making money.
TC Energy Corporation (TRP)
Investors far and wide are on the prowl for companies highlighted by business models that are immune to fluctuations in the short-term. If you want to park your money in a stock that is not significantly affected by the volatility in weekly or monthly oil prices as well as undulations in oil volume, look no further than TRP.
This Canadian pipeline superstar traded down to $34 in late March yet steadily climbed back up to its current trading level of $43. The stock’s 52-week low is $37 and change. Its 52-week high is just under $58. In short, TRP is likely to move between the mid-$30s and upper $50s for the foreseeable future.
The only question is how long it will take for TRP to move back to the $50 level. TRP’s business model is centered on cash flowed secured through contracts that mandate shippers provide fee payment even if the allotted capacity goes unused.
TRP’s dividend of 5.23% combined with its average analyst price target of $51.06 makes it quite attractive. Furthermore, the POWR Ratings have TRP ranked #4 of 32 stocks in the Foreign Oil & Gas space, highlighted by an A Peer Grade.
Genie Energy (GNE)
Give the POWR Ratings a glance and you will see one stock in the Energy – Oil & Gas industry stands above the rest: GNE. This oil, gas and electricity company has projects in Colorado as well as Israel. GNE supplies fuel and power to states in the Northeastern part of the country. GNE’s business also includes alternative fuels used for transportation.
With a strong B POWR Rating, an A Peer Grade, a 4% dividend and a trading price under $9, GNE holds considerable appeal. The stock is trading about $3 above its coronavirus low point of $5.51 in mid-March.
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ENB shares were trading at $32.65 per share on Monday morning, up $0.20 (+0.62%). Year-to-date, ENB has declined -15.16%, versus a -5.17% rise in the benchmark S&P 500 index during the same period.
About the Author: Patrick Ryan
Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More...
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