In this article, we discuss the 10 oversold energy stocks you can buy. To skip the detailed analysis of the energy industry, go directly to the 5 Oversold Energy Stocks You Can Buy.
Over the past few years, energy has been one of the most trending topics in the world, including the financial markets. The main topic of discussion is the transition of global energy from fossil fuels to renewable energy. According to Allied Market Research, global fossil fuel energy is expected to grow at a compound annual growth rate (CAGR) of 5.3% between 2022 to 2031, while the renewable energy market is expected to grow at a CAGR of 8.4% between 2021 to 2030. The main reason for the transition from fossil fuels to renewable energy is the negative impact of climate change due to high carbon emissions. Between 1751 and 2018, the top three companies with the most carbon emissions are oil companies, Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and Saudi Arabian Oil Company (TADAWUL:2222.SR).
Conventional Energy Market Latest Updates
The global oil and gas industry made one of its biggest comebacks in 2022 when Russia invaded Ukraine, making the oil and gas prices soar through the skies. At the end of the year, fossil fuel energy prices started to fall. However, in 2023, a Deloitte survey suggests that the majority of the executives in the oil and gas sector have a positive outlook on the industry for 2023.
According to The International Energy Agency (IEA), the global oil demand is expected to reach a record high of 102.1 million barrels per day (mb/d) after rising by 2.2 mb/d and the growth will slow down next year by 1.1 mb/d in 2024. 70% of the growth in 2023 will be accounted for by China as the country’s Covid restrictions started to ease this year.
The current year hasn’t been kind to the natural gas prices as the average natural gas price at Henry Hub declined by 40% year-over-year and 57% sequentially in the first quarter of 2023. Nevertheless, IEA’s short-term outlook released in June revealed that US natural gas production was 104 billion cubic feet per day (Bcf/d) in April, setting a monthly record and up 2 Bcf/d from March. The US gas future showed some momentum on June 26, when its futures rose to their highest in almost four months based on hot weather predictions. However, this victory for natural gas futures was short-lived. On July 17 natural gas futures hit a 3-week low on less hot weather forecasts. Despite that, Front-month Nymex natural gas (NG1:COM) closed at $2.512 on July 17 and reached $2.603 on July 19.
Renewable Energy Market Latest Updates
Renewable energy stocks have become hot since the European Union reached a provisional deal to increase the percentage of renewable energy in its total energy mix to 42.5% by 2030 compared to the current 32%. The solar energy market is forecasted to grow the most between 2022 and 2027 and is anticipated to become the biggest source of energy after an increase of 1500 gigawatts at the end of the forecasted period.
The IEA provided a renewable energy outlook for 2023 and 2024 in June which states that global renewable capacity is going to experience its largest increase ever at 107 gigawatts, reaching over 440 gigawatts. In 2024, solar farm additions will continue to rise while wind power is expected to face some challenges. In recent years, China has become the global leader in renewable energy deployment and by 2024, it is expected to account for 55% of global annual renewable capacity deployment.
At Insider Monkey, we cover the energy sector extensively, including the solar, wind, nuclear, oil, and natural gas industries. For this article, we compiled a list of the most oversold energy stocks which include Clearway Energy, Inc. (NYSE:CWEN), Delek Logistics Partners, LP (NYSE:DKL), and TC Energy Corporation (NYSE:TRP).
10 Oversold Energy Stocks You Can Buy
Our Methodology
For this article, we compiled a list of 10 energy stocks with the lowest 14-day Relative Strength Index (RSI) as of July 19. The Relative Strength Index is a technical indicator that tracks momentum changes in stock prices. It was developed by J. Welles Wilder and it is calculated by determining the mean of gains and losses of a stock in the last 14 days. An RSI above 70 implies that a stock is overbought and below 30 implies that it is oversold. These levels can be adjusted if needed. The stocks in this article are listed in descending order of their RSI.
Note that, we only chose the stocks that are listed on NYSE and NASDAQ. We also avoided small-cap stocks due to their high volatility.
Dominion Energy, Inc. (NYSE:D) is an American energy company that provides electric utility and natural gas in several US states. It is the 10th most oversold energy stock on our list with a 14-day Relative Strength Index of 40.33. In the first quarter of 2023, 28 hedge funds had a stake in Dominion Energy, Inc. (NYSE:D), valued at $473.084 million.
On June 30, Dominion Energy, Inc. (NYSE:D) lowered its EPS guidance for the second quarter due to mild weather and unplanned outages at its Millstone nuclear power station which is based in Connecticut. The company expects its Q2 earnings between $0.44-$0.50 per share, down from $0.58-$0.68 per share.
On July 10, Dominion Energy, Inc. (NYSE:D) announced that it is selling its stake in Cove Point LNG, LP to Berkshire Hathaway Inc. (NYSE:BRK-A). The company had a 50% non-controlling limited partner interest in Cove Point LNG, LP.
Clearway Energy, Inc. (NYSE:CWEN), Delek Logistics Partners, LP (NYSE:DKL), and TC Energy Corporation (NYSE:TRP) are some of the oversold energy stocks on our list along with Dominion Energy, Inc. (NYSE:D).
Diamond Hill Capital made the following comment about Dominion Energy, Inc. (NYSE:D) in its Q4 2022 investor letter:
“Other bottom contributors included media and technology giant Alphabet, apparel and footwear company V.F. Corporation and utility operator Dominion Energy, Inc. (NYSE:D). Dominion Energy’s stock price weakness was due in part to regulatory concerns surrounding its triennial rate review process and its offshore wind program. Additionally, management highlighted cost pressures, which could hamper growth rates. We believe these headwinds are short-term in nature and continue to hold our position.”
Denbury Inc. (NYSE:DEN) is a Texas-based hydrocarbon exploration company. On July 13, Exxon Mobil Corporation (NYSE:XOM) announced that it is looking to acquire the company in an all-stock transaction of $4.9 billion or $89.45 per share. Denbury Inc. (NYSE:DEN) is being acquired at a 7% premium from its stock price of $83.59 at the market close on July 19.
Denbury Inc. (NYSE:DEN) was held by 39 hedge funds in the first quarter of 2023. Pentwater Capital Management increased its stake in the company by 310% in Q1 and was the most prominent hedge fund holder of the company. The hedge fund owned 2.435 million Denbury Inc. (NYSE:DEN) shares worth $213.379 million.
On June 27, Denbury Inc. (NYSE:DEN) formed a 50-50 joint venture with Lapis Energy to develop a carbon capture project. The project will be developed on Lapis Energy’s property based in Louisiana.
Portland General Electric Company (NYSE:POR) is an American utility company that provides electricity to its customers through thermal units, hydroelectric power, and renewable energy. In Q1 2023, the company stocks were held by 26 hedge funds, compared to 24 in the previous quarter. Zimmer Partners was the largest stakeholder of Portland General Electric Company (NYSE:POR) in Q1 with 5.65 million shares worth $276.228 million.
Portland General Electric Company (NYSE:POR) is one of our under-the-radar high dividend stocks to buy. As of the market close on July 19, the company has a dividend yield of over 4%. Its last quarterly dividend was paid out on July 17 while the next one is expected to be paid mid-October.
Portland General Electric Company (NYSE:POR) has been covered by three analysts in the last three months with two Buy ratings and one Hold. The average analyst price target stands at $52. Portland General Electric Company (NYSE:POR) is our 8th most oversold stock with a Relative Strength Index of 39.60.
New Jersey Resources Corporation (NYSE:NJR) is a New Jersey-based utilities company operating in four divisions including natural gas distribution, clean energy ventures, energy services, and storage and transportation. New Jersey Resources Corporation (NYSE:NJR) was incorporated in 1981.
On July 16, New Jersey Resources Corporation (NYSE:NJR)’s board of directors announced a $0.39 dividend per share, which is in line with its previous one. The dividend will be paid by October 2 to the shareholders of record on September 20. New Jersey Resources Corporation (NYSE:NJR) has been increasing its dividend for the past 27 years and as of July 19, it has a dividend yield of nearly 3.4%.
New Jersey Resources Corporation (NYSE:NJR) was held by 9 hedge funds in the first quarter of 2023.
First Pacific Advisors made the following comment about New Jersey Resources Corporation (NYSE:NJR) in its Q1 2023 investor letter:
“New Jersey Resources Corporation (NYSE:NJR) is a regulated gas utility for Southern New Jersey. The company has slowly and prudently diversified into midstream, solar, marketing and services while continuing to grow the core utility. Shares performed well on the back of successive strong earnings reports and improved guidance.”
Scorpio Tankers Inc. (NYSE:STNG) is a shipping company focusing on the transportation of refined petroleum products. As of July 19, the company has a Relative Strength Index of 39.31, making it the 6th most oversold energy stock on our list. Scorpio Tankers Inc. (NYSE:STNG) has a trailing twelve-month PE ratio of 2.81.
On June 29, Deutsche Bank analyst Chris Robertson upgraded Scorpio Tankers Inc. (NYSE:STNG) stock from Hold to Buy with an unchanged price target of $55, showing an upside of over 30% from the stock price of $42.28 on July 19 close. The analyst believes that tanker demand will increase this summer, continuing well into the third quarter as refinery maintenance slows down.
Scorpio Tankers Inc. (NYSE:STNG) was a part of 33 investment portfolios in Q1 2023, down from 36 in Q4 2022. However, the total stake value increased in the company from $519.223 million to $556.274 million between the two quarters. Schonfeld Strategic Advisors increased its stake in the company by 7434%, Arrowstreet Capital increased its holdings by 558%, and TwinBeech Capital added 320% to its previous holdings in the company, marking some of the most significant additional purchases in Scorpio Tankers Inc. (NYSE:STNG) stock.
Scorpio Tankers Inc. (NYSE:STNG) is one of the oversold energy stocks to buy in addition to Clearway Energy, Inc. (NYSE:CWEN), Delek Logistics Partners, LP (NYSE:DKL), and TC Energy Corporation (NYSE:TRP).
