Top Energy Stocks for January 2022.

The energy sector is composed of companies focused on the exploration, production, and marketing of oil, gas, and renewable resources around the world. Energy sector stocks include upstream companies that are primarily engaged in the exploration of oil or gas reserves, such as Devon Energy Corp. (DVN). Downstream companies include HollyFrontier Corp. (HFC), which refines and processes oil and gas products for delivery to consumers. Among the industry’s biggest players are Chevron Corp. (CVX) and ExxonMobil Corp. (XOM).

Oil prices have surged dramatically in the past year after plunging in spring 2020 at the onset of the global COVID-19 health crisis. At the same time, gas prices have reached record levels. The cyclical industry is expected to continue its strong rebound. The International Energy Agency projects a recovery of oil to pre-pandemic levels by end of 2022.

Energy stocks, as represented by the Energy Select Sector SPDR ETF (XLE), have outperformed the broader market, posting a total return of 41.8% over the last 12 months compared to the iShares Russell 1000 ETF’s (IWB) total return of 28.1%. The market performance numbers and all statistics in the tables below are as of Dec. 10, 2021.

Here are the top three energy stocks with the best value, the fastest growth, and the most momentum.

These are the energy stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows that you’re paying less for each dollar of profit generated.

Source: YCharts

• Marathon Petroleum Corp.: Marathon is a crude oil refining company. Serving customers across the United States, the company refines, supplies, transports, and sells petroleum products. The company reported net income of $694 million attributable to Marathon Petroleum Corp. for Q3 2021, ended Sept. 30, compared with a net loss for the prior-year quarter. It also reported an 85.9% year-over-year (YOY) increase in total revenues and other income. The results included pre-tax charges related to Hurricane Ida, impairments, and idling costs.
• HollyFrontier Corp.: HollyFrontier transports, refines, stores, and sells petroleum products. It offers light products including gasoline and jet fuel, which are sold in the southwestern U.S. and northern Mexico. On Nov. 10, the company announced the promotion of Tim Go to president and chief operating officer, effective immediately. Previously, Go was executive vice president and chief operating officer of the company since June 2020.
• Antero Midstream Corp.: Antero Midstream owns, operates, and develops energy infrastructure. The company owns and operates gathering pipelines, compressor stations, processing and fractionation plants, and similar infrastructure.

These are the top energy stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly YOY percentage revenue growth and their most recent quarterly YOY earnings-per-share (EPS) growth. Both sales and earnings are critical factors in the success of a company. Therefore, ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one figure or the other unrepresentative of the business in general. Companies with quarterly EPS or revenue growth of more than 2,500% were excluded as outliers.

Source: YCharts

• Targa Resources Corp.: Targa Resources is a midstream natural gas and natural gas liquids services company. It gathers, compresses, treats, processes and sells natural gas, liquid petroleum gas and crude oil. Net income attributable to Targa Resources jumped 164% as total revenues rose 162.9% in Q3 2021 ended Sept. 30. Despite the income growth, the company posted higher operating expenses, including rising labor costs.
• ONEOK Inc.: ONEOK is a diversified energy company with operations across the U.S. It is a midstream energy company focused on natural gas. After reporting a 26% increase in net income in Q3 FY 2021, ONEOK raised its full-year net income guidance to between $1.43 billion and $1.55 billion. Its previous guidance was net income between $1.2 billion and $1.5 billion.
• Texas Pacific Land Corp.: The company owns tracts of land in Texas. It issues transferable certificates of proprietary interest and derives income from land sales, oil and gas royalties, and grazing leases. For Q3 2021 ended Sept. 30, the company reported net income growth of 81.2% YOY on strong growth in total revenues. Texas Pacific Land Corp. attributed the performance in part to its “vast surface footprint” and strategic investments in its water business. During the nine months ended Sept. 30, 2021, the company repurchased $11.2 million shares of its common stock.

These are the energy stocks that had the highest total return over the last 12 months.

Source: YCharts

• Devon Energy Corp.: Devon Energy is an energy company involved in oil and gas exploration, development, and production. The company also transports oil, gas, and related products and processes natural gas. It has midstream and marketing operations primarily in North America. Devon announced in November financial results for Q3 of its 2021 fiscal year (FY), the three month period ended Sept. 30, 2021. The company posted operating cash flow of $1.6 billion, which a 46% increase from Q2. The company reiterated its intention to prioritize free cash flow over volume growth going into 2022.
• Continental Resources Inc.: Continental Resources explores for and produces oil in the U.S. The company focuses its operations largely in North Dakota and Montana. On Nov. 9, 2021, Continental Resources announced its intention to offer a series of senior notes due in 2026 and 2032 to help fund the purchase of the Delaware Basin assets of Pioneer Natural Resources. This purchase will help expand Continental’s operations.
• Diamondback Energy Inc.: Diamondback Energy deals with the acquisition, exploration, and development of onshore oil and natural gas reserves mainly in the Permian Basin in West Texas.

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