After the oil price plummet, you may be looking to invest in the top energy stocks. I compared the recent business performance of 9 oil & gas integrated companies and 7 midstream companies, respectively. I focused my analysis on profitability and debt because those factors determine whether an energy stock will survive or even thrive in a prolonged low oil price environment.
The oil & gas integrated companies analyzed include Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and Suncor Energy (TSX:SU)(NYSE:SU), and the midstream companies analyzed include Kinder Morgan Inc (NYSE:KMI), Magellan Midstream Partners, L.P. (NYSE:MMP), and Enbridge Inc. Which are the safest energy stocks for long-term investing?
Safest Integrated Oil & Gas Stocks
From the integrated oil & gas stocks, Suncor Energy is a winner. It has low cost of operations, high operating margins, as well as a culture to increase dividends. Exxon Mobil and Chevron are also winners because they have relatively high operating margins and low debt levels that can only benefit them in the low oil price environment.
Safest Pipeline Stocks
From the pipelines, for U.S. citizens, Magellan Midstream Partners, Enterprise Products Partners L.P. (NYSE:EPD), and Spectra Energy Partners, LP (NYSE:SEP) seem to be good choices if you’re looking for tax-deferred income in a taxable account and don’t mind keeping track of the cost basis.
With the gloomy picture painted by the prolonged low oil price, these energy stocks aren’t likely to rise anytime soon. Additionally, there could be tax-loss selling as we near the end of the year. So, it’d be safer to dollar-cost average into these high quality energy stocks over time. Simultaneously, it’s essential to maintain a diversified portfolio of stocks that aren’t correlated to each other.
It could take several years for energy demand to catch up to the excess oil supply. So maybe every quarter or so, investors could opt to add money in this space if they believe in the long-term demand of oil.
- Are you adding to any energy stocks today?
- Or are you patiently waiting for the right entry point?
- If you are, buying, I’m curious what you are buying.
- If you’re waiting, I’m curious to know what indicators or prerequisites you’re waiting for.
- What are the metrics that you most care about for the oil & gas integrated companies?
- What are the metrics that you most care about for the midstream companies?
To see the detailed analysis that got to the safest energy stocks, check out this Seeking Alpha article: Wishing I Could Restart My Energy Portfolio With These Dividend Stocks
If you like what you've just read, consider subscribing via the "Subscribe Here" form at the top right so that you will receive an email notification when I publish a new article.Disclosure: At the time of writing, I am long SU, XOM, CVX, ENB, and KMI.
Disclaimer: I am not a certified financial advisor. This article is for educational purposes, so consult a financial advisor and or tax professional if necessary before making any investment decisions.
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