With 2025 upon us, I wanted to take a look at three of my favorite stocks in the energy, consumer products, and technology sectors, all of which I currently own. I primarily concentrated on these three sectors when I worked as an analyst at an investment fund.
All three stocks offer strong growth at attractive valuations. Since they are in three completely different sectors and businesses, they can also help add diversity to a portfolio. I think all three stocks can be held for the next three years and beyond.
Energy Transfer
Energy Transfer(NYSE: ET) owns one of the largest integrated midstream systems in the U.S. The company transports, stores, processes, and upgrades various hydrocarbons such as natural gas, NGLs (natural gas liquids), crude, and refined products (such as gasoline). Because of the size and diversity of its system, it is able to take advantage of a lot of energy arbitrage opportunities. This could be something like transporting natural gas to a higher-priced region or upgrading an NGL like ethane to ethylene if the margins are higher.
The company's system is also very well situated to take advantage of any increased power needs stemming from artificial intelligence (AI), as it has access to cheap natural gas in the Permian Basin. The Permian is primarily an oil basin without enough natural gas takeaway, making it one of the cheapest areas of natural gas in the country. In fact, Permian natural gas prices were often below $0 in 2024.
As a result, Energy Transfer has received numerous inbound calls for potential natural gas projects from both power companies and data centers. The company also just announced a big $2.7 billion natural gas takeaway project from the Permian that it said would help support power plant and data center growth in Texas.
In addition to these growth opportunities in front of it, Energy Transfer is cheap compared to its peers and from a historical level, trading at an enterprise value (EV)-to-EBITDA (earnings before interest, taxes, depreciation, and amortization) multiple of just 8.4 times. Master limited partners (MLPs), meanwhile, traded at an average multiple of 13.7 times between 2011 and 2016.
The combination of growth, valuation, and a more favorable energy regulatory environment make Energy Transfer one of my favorite stocks to own over the next few years. It has a nice 6.6% forward yield and expects to grow its distribution by 3% to 5% moving forward.
E.l.f Beauty
E.l.f Beauty(NYSE: ELF) is not only one of the best growth stories in the consumer space; it's also one of the cheapest growth stories out there.
Through a combination of influencer marketing and replicating products from popular prestige brands, the company's cosmetics products have become extremely popular, especially with younger demographics. This, in turn, has led the company to gain a ton of shelf space as well as massive market share in the mass cosmetics space over the past few years.
The company's products are even resonating in international markets, where it has quickly become the No. 1 mass cosmetic brand in a number of international stores that it has entered. However, this is still a very big growth opportunity moving forward.
Its biggest opportunity, though, may be in moving into adjacent categories. It has two fast-growing skincare brands, one of which is its namesake brand, and the other is the slightly higher-priced Naturium. It should have a long runway here. Meanwhile, fragrance and hair care are two other future opportunities it could get into.
E.l.f grew its sales by 40% last quarter, but the stock only trades at a forward P/E of 28.5 and a price/earnings-to-growth ratio (PEG ratio) of just 0.5. PEGs under 1 are generally considered cheap, especially for a growth stock, so on that basis, E.l.f. stock looks like a huge bargain.
Image source: Getty Images
Alphabet
In the technology sector, I'm a big fan of Alphabet(NASDAQ: GOOGL)(NASDAQ: GOOG). The company is the dominant player in the search market with Google, while it also has one of the world's largest video streaming services, YouTube. It complements these businesses with a huge adtech business that feeds into Google, YouTube, and its other properties, such as Gmail and Maps.
It is this adtech business that should eventually help the company monetize the big AI opportunity it has in front of it with its AI Overviews and Gemini AI app. Historically, Google has only served ads to about 20% of its search results, but eventually, it should be able to create new ad formats for AI and begin to profit from some of the 80% of search queries it currently doesn't monetize.
Alphabet also owns the third-largest cloud computing business in Google Cloud. However, it has been the fastest-growing of the three big cloud providers, with revenue growth of 35% last quarter. Cloud computing is a high-fixed-cost business, and Alphabet has recently reached an inflection point where it is now leveraging these costs, which in turn is leading to outsized profitability growth. Last quarter, the segment's operating income soared from $266 million a year ago to $1.95 billion.
In addition, the company also has a number of emerging businesses. This includes quantum computing, where it recently announced a major breakthrough, as well as autonomous driving, where its Waymo unit has sped out to a nice lead, being the only company currently offering paid autonomous driving taxi rides.
Investors get all these businesses for a forward P/E of just 18.5 times, making Alphabet one of my favorite tech stocks.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Geoffrey Seiler has positions in Alphabet, Energy Transfer, and e.l.f. Beauty. The Motley Fool has positions in and recommends Alphabet and e.l.f. Beauty. The Motley Fool has a disclosure policy.
