Energy Stocks: What You Should Know
Did you know that in 2019, natural gas accounted for 35% of the United States’ total primary energy production? As we look to more eco-friendly ways to provide the energy we need to survive, seasoned investors and newbies alike are gaining interest in the energy sector.
In short, the energy sector comprises companies and organizations focused on the production and marketing of gas, oil, and renewable resources worldwide.
That means in order to invest in energy stocks, you’re not just limited to buying stock in your local energy company.
There are thousands of companies that focus on producing and distributing energy—but in this article, we’re going to take a closer look at energy penny stocks (those that trade for $5 or less per share).
One thing to keep in mind, though, is that while many penny stocks trade on the New York Stock Exchange (NYSE), there are some that trade through the over-the-counter (OTC) bulletin board. Those that trade outside the major stock exchanges are considered more of a risk since they don’t necessarily meet the requirements to trade on the NYSE.
The Top Energy Stocks Under $5
Let’s take a look at some of the top energy stocks under $5 that you can invest in now to start growing your portfolio. Please note that these stocks aren’t presented in any particular order, and are not meant to be construed as investment advice.
Tellurian Inc. (NASDAQ: TELL)
Tellurian, Inc. was founded in 2016, by Charif Souki and Martin Houston. The company is headquartered in Houston, TX. They are set to make a $25 billion investment in U.S natural gas and are pioneers in liquified natural gas (LNG) exports. In 2020, the company reported $37.43 million in revenue.
Tellurian has delivered over 79 million tonnes of LNG over the past five decades and their team alone is responsible for over 15% of LNG in production today. Their massive footprint in this market is just one reason to keep an eye on them!
At the time of publication, the stock has been on a bit of a roller coaster but is trending upward. The 52-week high was $4.38 and the 52-week low was $0.68.
Torchlight Energy Resources, Inc. (NASDAQ: TRCH)
Torchlight Energy Resources, Inc. is an oil and gas exploration and production company that was founded in 2007. Headquartered in Plano, TX, the company has four subsidiaries including Hudspeth Oil Corporation, Warwink Properties LLC, Torchlight Energy, Inc., and Torchlight Hazel, LLC.
Torchlight attributes its promise and poise for growth to its proven, successful management team and unprecedented access to pre-market deal flows.
The stock hit a high in February, but has declined a bit and held steady since. The 52-week high was $4.83 and the 52-week low was $0.22.
Orbital Energy Group, Inc. (NASDAQ: OEG)
Orbital Energy Group, Inc. was founded in 1998 and is headquartered in Houston, TX. Orbital Energy Group stands out in its dedication to maximizing shareholder value. How do they plan to achieve this?
By acquiring and developing other successful companies in order to develop a strongly diversified “energy infrastructure platform.” Orbital Energy’s groups of businesses comprise:
Orbital Solar Services
Orbital Power Services
Orbital Gas Systems
In 2020, the company reported $38.41 million in revenue, a significant increase its last year of $23.49M, and $20.34M in 2018.
The stock hit a high in February, but has declined a bit and held steady since. The 52-week high was $11.20 and the 52-week low was $0.45.
General Electric Company (NYSE: GE)
An actual powerhouse, General Electric Company is a well-known company with a long-established history in the energy sector. They are a world leader in providing equipment, services, and solutions throughout the entire energy supply chain from generation through consumption.
Chances are, an appliance or a lightbulb in your home or office comes from GE; you would most definitely recognize its iconic blue logo.
In 2020, the company reported $79.89 billion in revenue, a significant decrease from $95.06B in 2019, and $98.44B in 2018. The 52-week high was $14.42 and the 52-week low was $5.48.
Clean Energy Fuels Corp. (NASDAQ: CLNE)
Clean Energy Fuels Corp. focuses on providing energy and renewable natural gas to the transportation market. It was founded in 2001 and is headquartered in Newport Beach, California.
As society evolves and transportation fuel needs adapt, we’re likely to see increased demand and prevalence for natural gas and clean fuels for vehicles. Natural gas is attainable, and Clean Energy Fuels intends on leading the charge in this market.
In 2020, the company reported $289.59 million in revenue, a significant decrease from $360.65M in 2019, and $346.42M in 2018. The 52-week high was $19.79 and the 52-week low was $1.73.
What to Look For When Investing in the Energy Sector
As with the healthcare sector, the energy sector can be tough for investors, particularly when it comes to oil and gas companies.
Energy prices can change in a matter of seconds, which massively affects the industry and the global economy. At the beginning of the Coronavirus pandemic, we saw a number of companies file for bankruptcy as the travel industry (and even the daily commute to work) came screeching to a halt.
When it comes to investing in a commodity, it’s important to understand how to invest in energy.
It’s a market with a lot of volatility since oil prices tend to fluctuate from day to day. It’s best not to allocate too much of your portfolio into a single stock or the industry overall.
When possible, stick with companies that are the least likely to go out of business, even if the industry conditions decline rather significantly.
So, what are just some of the contributors to an energy company’s promise? Here are some of the things to look for:
Strong Balance Sheet: Pay close attention here, because it is a good indicator of a company’s financial health. It should show plenty of cash on hand and a borrowing capacity (liquidity), with a high investment-grade credit rating, and few near-term debt maturities.
Conservative Dividend Payout: Dividends are nice, but a conservative dividend payout ratio compared to sub-sector peers is always a good sign. It usually means they have good earnings per share or EPS.
Low Production Costs: This means they’re not spending a lot of money on production. If they don’t have low production costs, they should at least have stable revenue with little exposure to fluctuations in pricing or volume. Ideally, they’re supposed by long-term fixed-fee contracts or regulated rates.
Get the Latest on Energy Stocks with WALLSTNOW
If energy stocks are too much risk for you, consider trading penny stocks in other industries such as the mining industry or tech industry. Add a few energy stocks to your watchlist and follow them for a while before you actually invest.
Observe relevant stock market news to find companies who are about to make their initial public offering (IPO). That way, you can get in on the ground floor with companies that are starting with good valuations.
In the energy market, the best penny stocks and renewable energy stocks are those that are investing in green energy, reducing emissions, and reducing our dependence on fossil fuels. Other areas to consider investing in are solar energy and electric vehicles.
As the Biden administration pushes for more green and clean energy initiatives, companies may find themselves more empowered and prove to be a rewarding investment.
Want to make sure you’re updated with real-time information while you decide on which energy penny stocks to buy? Stick with us at WALLSTNOW to learn more about stocks and investing now!
Disclaimer: All investments involve the risk of loss. Nothing on this website should be misconstrued as investment advice. Any reference to an investment’s historical or projected performance is not a recommendation or guarantee of profit or desired outcome.