Energy stocks posted enormous gains in 2022 as other segments in the stock market struggled. Energy stocks were helped by rising prices as the world scrambled to meet energy demand amid Russia-Ukraine war. Analysts believe energy stocks are poised to outperform in 2023 as well. Despite huge gains, some analysts believe energy stocks are still trading at attractive valuations. According to a Bloomberg report published in January, Ben Cook, a portfolio manager at Hennessy Funds, said that energy stocks are cheap and the sector has the highest free cash-flow yield of any sector. Cook expects oil and gas stocks to lead gains in 2023.
Perhaps one of the biggest reasons why investors are flocking to energy stocks is dividends. In 2022, several energy firms raised their dividends. Investors, who are hungry for safety and certainty during the current market turmoil, are welcoming these dividend policies. Some of the notable energy companies that upped their dividends last year include Diamondback Energy, Pioneer Natural Resources and Halliburton. According to a Bloomberg report published on December 21, five of the S&P 500’s 10 biggest dividend boosts in 2022 came from energy stocks.
The report also quoted Energy Income Partners Chief Executive Officer James Murchie, who said that investors “want to see the cash” during recessions and energy and utilities stocks tend to perform better during recessions as investors flock to these sectors due to dividends.
Can Energy Outperform in 2023?
The energy industry now has several segments. Investors have the opportunity to invest in the renewable energy segment to reap rewards in the future as the world slowly but surely moves to cleaner energy options. In this article you will see some stocks from the renewable energy segment that have posted significant gains over the past month. And it’s always better to diversify investments, even in the energy sector. Despite all the optimism and record gains posted last year, some analysts do believe energy stocks could face some turbulence in 2023. Notable of these bears is Truist Securities’ Neal Dingmann, who expects an 18% lower free cash flow for the energy sector in 2023. The analyst thinks that chances that the tailwinds that helped companies in the sector over the past two years will remain this year are thin. The analyst also thinks that costs in the oilfield segment will rise, which will make production of oil and gas more expensive in 2023.
Another concern for energy investors has been the constant threat of recession. Energy demand falls when recessions hit as economic activity slows down. Morgan Stanley’s chief investment officer Mike Wilson in December 2022 warned that energy stocks are vulnerable to economic slowdown. He advised investors to pile into defensive sectors like healthcare, utilities and consumer staples.
For this article, we first used the Finviz stock screener to list down energy stocks that gained at least 20% over the past month as of the market close of January 31. From the long list of stocks we chose 12 stocks that are trading on US stock exchanges and had the highest stock price gains in the 31-day period.
HighPeak Energy, Inc. (NASDAQ:HPK) is a Texas-based energy company whose shares shot up about 20% in January. Perhaps most of HighPeak Energy, Inc. (NASDAQ:HPK) gains came after the company said it will launch a process to evaluate certain strategic alternatives including a potential sale of the company. HighPeak Energy, Inc. (NASDAQ:HPK) said it has hired Credit Suisse and Wells Fargo as financial advisors and Vinson & Elkins as legal counsel to assist in the review process. In the first half of 2023, HighPeak Energy, Inc. (NASDAQ:HPK) plans to reduce its drilling rigs from six to four. Earlier in January, HighPeak Energy, Inc. (NASDAQ:HPK) had announced a $0.025 per share quarterly dividend, in line with the previous. The forward dividend yield at the time came in at 0.42%.
As of the end of the third quarter of 2022, 7 hedge funds had stakes in HighPeak Energy, Inc. (NASDAQ:HPK), according to Insider Monkey’s proprietary data of elite hedge funds’ holdings.
Cameco Corporation (NYSE:CCJ) is one of the biggest names in the uranium energy space. Cameco Corporation (NYSE:CCJ) gained about 22% in January 2023. In October, Cameco Corporation (NYSE:CCJ) posted strong third-quarter results, which were driven by higher uranium prices. Cameco Corporation (NYSE:CCJ) said its adjusted EPS in the third quarter came in at $0.03, beating estimates by 4 cents. Revenue in the period totaled $389 million, missing estimates by $116.84 million. Cameco Corporation (NYSE:CCJ)’s uranium production volume remained flat at 2 million lbs.
Cameco Corporation (NYSE:CCJ) is one of the most popular energy stocks among elite hedge funds tracked by Insider Monkey. As of the end of the third quarter of 2022, 46 hedge funds had stakes in Cameco Corporation (NYSE:CCJ), compared to 40 funds in the previous quarter.
Nuclear power company Centrus Energy Corp. (NYSE:LEU) ranks 10th in our list of the top performing energy stocks in January 2023. Centrus Energy Corp. (NYSE:LEU) gained about 22% in the month. In November, Centrus Energy Corp. (NYSE:LEU) came in the limelight after the company said the U.S. Department of Energy announced a $150 million cost-share award to it for Centrus Energy Corp. (NYSE:LEU)’s help for demonstration of high assay low-enriched uranium needed to fuel emerging advanced reactor designs. The contract will enable production at Centrus Energy Corp. (NYSE:LEU)’s Ohio plant.
In September last year, it was reported that Centrus Energy Corp. (NYSE:LEU) secured new nuclear fuel sales contracts and commitments worth about $320 million over the past one year through September 2022.
American Resources Corporation (NASDAQ:AREC) is involved in the extraction, processing, transportation, distribution, and sale of metallurgical coal to the steel industries. The performance of the stock in January was remarkable since American Resources Corporation (NASDAQ:AREC) posted huge losses in November after Iceberg Research, which said it was short AREC, published a report on American Resources Corporation (NASDAQ:AREC) alleging that it had a "low-quality" mining business.
4 hedge funds had stakes in American Resources Corporation (NASDAQ:AREC) as of the end of the third quarter of 2022.
New Hampshire-based North European Oil Royalty Trust (NYSE:NRT) is a grantor trust that holds overriding royalty rights covering gas and oil production in various concessions or leases in the Federal Republic of Germany. North European Oil Royalty Trust (NYSE:NRT) gained about 24% in January. On January 31, North European Oil Royalty Trust (NYSE:NRT) increased its dividend by a whopping 35.1%. North European Oil Royalty Trust (NYSE:NRT) announced a dividend of $1.00 per share. Forward dividend yield of North European Oil Royalty Trust (NYSE:NRT) came in at over 26%. The dividend is payable February 28 for shareholders of record as of February 17.
Texas-based Adams Resources & Energy, Inc. (NYSE:AE) is involved in marketing, transportation and storage of various crude oil and natural gas basins in the United States. During the third quarter, Adams Resources & Energy, Inc. (NYSE:AE)’s revenue jumped about 50% to total about $852.91 million. Adjusted EPS in the period totaled $1.06.
3 hedge funds had stakes in Adams Resources & Energy, Inc. (NYSE:AE) at the end of the September quarter of 2022.
NextDecade Corporation (NASDAQ:NEXT) is operating in the LNG space and is also involved in carbon capture activities. Recently, NextDecade Corporation (NASDAQ:NEXT) announced it entered a long-term sale and purchase agreement with Japan's Itochu Corp. for the supply of liquefied natural gas from the proposed Rio Grande LNG export project in Texas. According to the contract, the Japanese company will buy 1 million metric tons/year of LNG indexed to Henry Hub on a free-on-board basis. The agreement’s time period is 15 years.
Similarly, in December, NextDecade Corporation (NASDAQ:NEXT) announced a sale and purchase agreement with Portugal’s Galp for a long-term supply of LNG from NextDecade Corporation (NASDAQ:NEXT)'s Rio Grande LNG export project in Brownsville, Texas.
As of the end of the third quarter, 13 hedge funds reported owning stakes in NextDecade Corporation (NASDAQ:NEXT), as compared to 8 funds in the previous quarter. The biggest stakeholder of NextDecade Corporation (NASDAQ:NEXT) was James Dinan’s York Capital Management $345 million.
