| Best Energy Stocks for September 2024 | |||||
|---|---|---|---|---|---|
| Ticker | Company | Market Cap ($B) | Price ($) | 30-Day Return (%) | P/E Ratio |
| NOVA | Sunnova Energy International Inc. | 1.0 | 8.37 | 14.8 | N/A |
| VNOM | Viper Energy Inc. | 8.3 | 47.17 | 13.7 | 16.1 |
| CWEN | Clearway Energy Inc. | 5.8 | 28.86 | 12.5 | 37.5 |
| TRP | TC Energy Corp. | 45.9 | 44.25 | 10.9 | 18.3 |
| WEC | WEC Energy Group Inc. | 28.3 | 89.63 | 10.4 | 20.7 |
| XEL | Xcel Energy Inc. | 33.3 | 59.75 | 10.0 | 17.9 |
| NRG | NRG Energy Inc. | 17.0 | 82.37 | 9.4 | 8.8 |
| NEE | NextEra Energy Inc. | 160.4 | 78.04 | 8.77 | 25.3 |
| FE | FirstEnergy Corp. | 24.5 | 42.50 | 8.7 | 28.0 |
| SU | Suncor Energy Inc. | 52.7 | 41.52 | 8.1 | 9.8 |
What to Know About the Energy Sector
Energy stocks as a group saw negative returns in 2023, then rose early in 2024 along with the price of oil before dropping in the late spring and early summer. Over the past several weeks, these stocks have moved up and down slightly but have remained roughly flat as a group. Broadly speaking, energy stock prices tend to follow changes in energy prices; when energy prices peaked in 2022 due to Russia's invasion of Ukraine and the ongoing impact of the COVID-19 pandemic, for example, many energy sector companies saw gains.
Also key to the energy sector's performance are production levels globally. U.S. oil production has been somewhat higher than last year in several recent months, but many OPEC+ countries have capped production. Demand for energy products is continuing to grow, but there is a question as to whether supply will increase accordingly.
How We Chose the Best Energy Stocks
We identified the top energy stocks for September 2024 by conducting a screen of all stocks in the sector. We began by selecting a subset of energy sector stocks that trade on the New York Stock Exchange or the Nasdaq and which meet each of the following criteria:
- Share price is $5 or higher
- Daily trading volume is 100,000 or higher
- Market capitalization is $300 million or higher
From that subgroup, we ranked energy stocks by 30-day return and selected the top-performing stocks based on that metric. Note that the stocks we evaluated are those of energy companies; this screen did not include products utilized in energy trading directly.
Energy Stock Advantages and Disadvantages
One of the key advantages of energy stocks is that the energy market is enormous, the result of the fact that the world relies on the energy sector to power cars, factories, machinery, and much more. The global energy market has a value of roughly $6 trillion. This means that companies can participate in the energy market in a variety of ways, and subindustries include energy storage, production, transportation, and distribution, among others. Investors can find many opportunities to specialize or focus their investments throughout these subindustries.
Not only is the energy industry massive, but it also has significant potential for growth. The United Nations expects that the world will need to invest $2.4 trillion per year over the next 11 years in energy systems in order to achieve the goals of theParis Climate Agreement. As the world transitions to renewable energy sources, investors will have a wider variety of opportunities to invest in companies unrelated to traditional fossil fuels.
On the other hand, there are also several important disadvantages of the energy sector. As described above, energy stocks are heavily dependent upon the price of energy, which is tied to a complex web of geopolitical factors and variables. This makes the energy sector highly volatile at times.
Investors focused on ESG goals may find it difficult to target energy companies for investment while maintaining these principles. Fossil fuels, in particular, are a major contributor to climate change; as climate change continues to develop, new challenges to the ways that we produce, store, and distribute energy are likely to emerge.
Energy stocks have the potential to be lucrative, but they also carry risks including bankruptcy and volatility. And while the stocks above are at the top of our screen for this month, past performance is not a guarantee of future returns.
The Bottom Line
Energy companies represent a broad range of businesses, including those in the hydrocarbon development and exploration field, those focused on renewable energy sources, and even some companies in utility services. They are impacted by—but not always directly linked to—the price of oil and other energy commodities. This makes the energy sector a strong, though imperfect, stand-in for investors unable to access the oil market directly. In other cases, investors focus on the energy sector to signal support for companies with ESG goals or other areas of business interest.
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As of the date this article was written, the author does not own any of the securities listed above.
