Here are some of the best-performing stocks in the energy sector over the past month.
The energy sector encompasses companies involved in the exploration, development, and production of oil and gas, as well as those in renewable energy and utility firms. This sector represents a significant market with strong growth potential, although a long-term shift away from fossil fuels has prompted some established companies to pivot their strategies.
Key Takeaways
The top energy stocks for June 2024, based on 30-day return, include NextDecade, Alliance Resource Partners, and EQT.
Energy stocks have had a stronger start in 2024 compared to 2023, bolstered by higher oil prices.
The stock prices of energy companies are often closely tied to the prices of energy products, which can be highly volatile.
Below are the best energy stocks for June 2024 based on 30-day returns. All data are current as of May 28, 2024.
What to Know About the Energy Sector
Energy stocks saw negative returns in 2023 but have rebounded early in 2024 alongside rising oil prices. Historically, energy stock prices tend to follow energy prices. For instance, during the peak of energy prices in 2022, driven by Russia’s invasion of Ukraine and the lingering effects of the COVID-19 pandemic, many energy sector companies experienced gains. While oil prices have trended upwards in 2024 relative to 2023, other energy sources like natural gas and heating oil have seen significant declines compared to their 2022 highs.
Global production levels are also crucial to the energy sector’s performance. Although U.S. oil production has been high recently, many OPEC+ countries have capped production. While demand for energy products continues to grow, it remains uncertain if supply will increase accordingly.
How We Chose the Best Energy Stocks
To identify the top energy stocks for June 2024, we conducted a screen of all stocks in the sector using the following criteria:
Share price of $5 or higher
Daily trading volume of 100,000 or higher
Market capitalization of $300 million or higher
From this subset, we ranked the energy stocks by 30-day return and selected the top performers. Note that our top-ranked stock, NextDecade Corp., does not have a P/E ratio listing due to net losses during the period in question.
Energy Stock Advantages and Disadvantages
One key advantage of energy stocks is the size of the energy market, valued at approximately $6 trillion. This vast market includes numerous subindustries such as energy storage, production, transportation, and distribution, offering diverse investment opportunities. Furthermore, the potential for growth is significant, with the United Nations estimating that $2.4 trillion per year will be needed over the next 11 years to meet the Paris Climate Agreement goals. The transition to renewable energy sources provides investors with opportunities to invest in companies beyond traditional fossil fuels.
However, there are notable disadvantages. Energy stocks are heavily dependent on energy prices, influenced by a complex web of geopolitical factors, making the sector highly volatile. Additionally, investors focused on ESG (Environmental, Social, and Governance) goals may find it challenging to invest in energy companies while adhering to these principles. Fossil fuels significantly contribute to climate change, and as this issue progresses, new challenges in energy production, storage, and distribution are likely to arise.
Energy stocks offer potential rewards but come with risks, including volatility and the possibility of bankruptcy. While the stocks mentioned are top performers this month, past performance is not indicative of future returns.
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