Top 8 Energy Stocks to Invest in 2024

The global shift away from fossil fuels is underway, but its momentum is heavily influenced by government policies, making energy a contentious political issue. In the United States, debates rage over environmental, social, and governance (ESG) criteria in investment decisions and the extent of oil and gas extraction on federal lands, reflecting the nation's deep divisions on energy policy.

The upcoming November presidential election between Joe Biden and Donald Trump presents a critical juncture for America's energy future. Biden's tenure has seen the implementation of significant renewable energy legislation, while Trump is expected to reverse many green initiatives if elected. The outcome will shape the trajectory of the U.S. energy industry and its global influence for the next presidential term.

Given the proximity of the election, investors in energy stocks are advised to proceed cautiously. Daniel Bustamante, chief investment officer at Bustamante Capital, suggests that the election results and subsequent policy changes could significantly impact the energy sector. He anticipates that the market may trade sideways or slightly higher for the remainder of the year, with legislative and policy risks affecting both renewable and traditional energy markets, regardless of other positive macroeconomic factors.

Top 8 Energy Stocks 2024

Bustamante's outlook on energy stocks is less optimistic compared to late 2023 and early 2024. However, he believes some stocks still offer reasonable upside potential. In light of this complex landscape, experts have compiled a list of energy stock recommendations for the year, balancing potential risks and opportunities in this evolving sector. Here is their recommended stock list:

• Quanta Services Inc. (PWR)

• Darling Ingredients Inc. (DAR)

• Valero Energy Corp. (VLO)

• Schlumberger Ltd. (SLB)

• Bloom Energy Corp. (BE)

• Gevo Inc. (GEVO)

• NextEra Energy Inc. (NEE)

• Cheniere Energy Inc. (LNG)

Quanta Services Inc. (PWR)

Market Cap: 39.08 billion

Quanta Services is positioned to benefit from long-term trends in electrification and decarbonization. The company is expected to grow due to the increasing need for upgrading and expanding the electric grid as more of the economy becomes electrified. Quanta's expertise in natural gas pipelines also provides flexibility as renewable natural gas gains market share. While specific stock performance metrics aren't provided in the document, the company is described as "well positioned to grow and thrive." This suggests a positive outlook for the stock, potentially driven by increased demand for its services in energy and communications infrastructure. Investors looking for exposure to secular growth trends in the energy sector might find Quanta Services an attractive option.

Darling Ingredients Inc. (DAR)

Market Cap: 6.35 billion

Darling Ingredients is highlighted as a company that turns edible by-products and food waste into sustainable products and renewable energy. With a global presence and involvement in repurposing about 15% of the world's meat industry waste streams, Darling is well-positioned in the sustainable energy sector. The company's joint venture with Valero Energy Corp., called Diamond Green Diesel, which produces fuel from used cooking oil, inedible animal fats, and corn oil, further strengthens its position in the renewable energy market. While specific stock performance data isn't provided, the company's involvement in multiple aspects of the circular economy and renewable energy suggests potential for growth. Investors interested in sustainability and renewable energy might find Darling Ingredients' stock appealing due to its diverse involvement in these growing sectors.

Valero Energy Corp. (VLO)

Market Cap: 51.81 billion

Valero Energy Corp.'s stock performance is described more specifically than some others in the document. As of June 6, the stock closed at $155.77, with an analyst price target of $175, suggesting potential upside. The company has been increasing dividends and share buybacks over the past two years, a trend expected to continue. In the first quarter alone, Valero returned $1.4 billion to shareholders through dividends and stock buybacks. The company's strong financial position, with lower debt and positive free cash flow at the end of the first quarter, supports this shareholder-friendly approach. However, the stock has experienced some decline since April, which the analyst views as a potential buying opportunity. Valero's involvement in refining and its joint venture in renewable diesel production with Darling Ingredients positions it in both traditional and renewable energy markets.

Schlumberger Ltd. (SLB)

Market Cap: 68.57 billion

Schlumberger's stock performance has faced some challenges in 2024. As of June 6, the stock had fallen 16% year-to-date. This decline is attributed partly to recently announced acquisitions, including plans to buy Aker Carbon Capture ASA and ChampionX Corp. These acquisitions have put some selling pressure on the stock, as it's common for acquiring companies' shares to fall after deal announcements due to the premium often paid for target companies. Despite the current downturn, the analyst believes these strategic acquisitions will add to the core of Schlumberger's business. The company's upcoming earnings report in July is seen as a potential catalyst, with the analyst considering buying on any weakness. Schlumberger's position as one of the world's largest international oilfield services companies suggests it could benefit from ongoing global demand for oil and gas services.

Bloom Energy Corp. (BE)

Market Cap: 3.07 billion

Bloom Energy is described as one of the "blue chips" of the green hydrogen sector. The company manufactures fuel cell systems that can run on various inputs, including hydrogen. This technology positions Bloom Energy to potentially benefit from the growing interest in green hydrogen as a clean energy solution. The company's products can be adopted by utilities and transportation industries, two sectors that are key to the energy transition. While specific stock performance metrics aren't provided, Bloom Energy's position in the green hydrogen market suggests potential for growth as this sector expands. However, investors should be aware that the green hydrogen industry is still in its early stages and may face technological and economic challenges.

Gevo Inc. (GEVO)

Market Cap: 136.89 million

Gevo is positioned in two growing areas of the renewable energy sector: sustainable aviation fuel and renewable natural gas. The company uses biomass to create aviation fuel, including starch byproduct from high-protein animal feed that it also produces. Additionally, Gevo makes renewable natural gas from dairy farm manure and high-protein animal feed from non-edible corn. While specific stock performance data isn't provided, Gevo's involvement in these emerging renewable energy markets suggests potential for growth. However, investors should note that companies in nascent renewable energy sectors often face significant challenges and volatility. The stock's performance may be influenced by factors such as technological advancements, regulatory changes, and the overall pace of adoption for sustainable aviation fuel and renewable natural gas.

NextEra Energy Inc. (NEE)

Market Cap: 156.95 billion

NextEra Energy is described as a large, stable play on the energy transition, frequently appearing in experts' top picks for renewable energy stocks. The company operates in two main segments: a regulated utility in Florida and a renewable energy production unit. In the first quarter, NextEra Energy significantly expanded its renewable energy portfolio, adding approximately 1,545 megawatts of solar, 145 MW of wind, 1,025 MW of storage, and 50 MW of wind repowering to its backlog. This was the company's second-best quarter ever for new renewables and storage origination, and its best quarter ever for both solar and storage origination. While specific stock performance metrics aren't provided, NextEra's strong position in both traditional utilities and renewable energy suggests it could offer investors a balance of stability and growth potential in the evolving energy sector.

Cheniere Energy Inc. (LNG)

Market Cap: 41.81 billion

Cheniere Energy is well-positioned in the liquefied natural gas (LNG) export market, with the U.S. being the world's biggest natural gas producer and LNG exporter. The company has one of the world's largest natural gas liquefaction platforms, with facilities in Louisiana and Texas. Cheniere is also pursuing liquefaction expansion opportunities. However, the company faces a potential risk due to the Biden administration's current pause on pending decisions for LNG exports to non-free-trade-agreement countries. If this pause is lifted, Cheniere could be in a strong position to benefit from new expansion possibilities. While specific stock performance data isn't provided, Cheniere's dominant position in the U.S. LNG export market suggests potential for growth, particularly if global demand for natural gas continues to rise. However, investors should be aware of the regulatory risks and potential impacts of shifts in global energy policies on the LNG market.

How to Buy Energy Stocks Step by Step

To invest in energy stocks, consider these steps:

1. Establish a Trading Account: Start by creating an online investment account dedicated to energy stock transactions. Evaluate various brokerages, comparing their energy sector offerings, commission structures, and available resources. Select a platform that best suits your energy investment objectives, then complete the registration process and deposit funds. This initial step sets the stage for your energy stock investment journey.

2. Conduct Energy Stock Analysis: Employ market screening tools to identify energy stocks based on factors like company size, energy industry focus, and fiscal health. Examine expert opinions for perspectives on energy stock prospects. Assess your risk appetite; well-established energy corporations might provide steadiness, while up-and-coming green energy firms could offer greater growth opportunities. This investigation aids in pinpointing energy stocks that correspond with your investment approach.

3. Calculate Energy Share Quantity: Ascertain the number of energy shares you wish to acquire, considering your financial capacity and the stock's current value. Spread your energy investments across various subsectors such as fossil fuels, sustainable energy, or power distribution. For high-priced energy stocks, explore fractional share options to participate without substantial capital outlay. Ensure this decision aligns with your energy sector investment targets and risk tolerance.

4. Select a Trading Method: Opt for the most suitable order type when purchasing energy stocks. An instant market order secures energy stocks at the prevailing price, whereas a limit order enables you to specify a maximum purchase price for the energy stock. Grasping these choices facilitates more strategic decisions in energy stock trading.

5. Execute Your Investment: Having decided on the energy stock, share amount, and order type, submit your order via your brokerage's platform. Thoroughly review all details prior to confirmation to ensure precision in your energy stock acquisition. Keep track of the order status to verify the successful completion of your energy stock transaction.

6. Oversee Your Energy Stock Holdings: Consistently evaluate and modify your energy stock investments. Keep abreast of energy sector developments, track individual energy stock performance, and consider updated expert analyses. Develop strategies for selling energy stocks to maximize returns or minimize losses. Regularly adjust your energy stock portfolio to maintain consistency with your financial objectives and risk tolerance in the dynamic energy market.

What to Look for When Choosing Energy Stocks to Buy

When selecting stocks for investment, consider these essential elements:

• Fiscal Robustness: Scrutinize the organization's financial statements to gauge its economic resilience. Assess its liabilities and overall monetary health. Also, examine the firm's profit ratios across time, as diminishing margins could indicate fiscal strain.

• Industry Standing: Appraise the company's position within its sector. Ascertain whether it's expanding or contracting its market presence relative to rivals. A strong competitive edge often portends future prosperity.

• Income and Earnings Patterns: Investigate the company's track record of revenue and profit expansion. Consistent growth in these areas is encouraging, while declining sales may constrain future prospects and potential achievements.

• Equity Appraisal: Weigh the stock's cost against its earnings and cash generation. Comprehending its valuation is critical for estimating future growth capacity. Seek out shares that present favorable value in relation to their development outlook.

• Executive Caliber: Assess the corporation's leadership and their commitment to stakeholder interests. Determine if the management is self-oriented or genuinely dedicated to expansion. Openness and ethical conduct are crucial for making well-informed investment decisions.

• Expansion Potential: Explore the company's capacity for future development. Identify clear avenues for growth and advancement, which can bolster its long-term outlook.

While these aspects are vital in investment decision-making, it's also worthwhile to consider the firm's capital deployment strategies, such as stock repurchases and dividend distributions, which may influence shareholder returns. A comprehensive evaluation of these characteristics can assist investors in making more knowledgeable choices when picking stocks to acquire.