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Best Energy Stocks to Buy in 2021

Author: Tony Loton

Many energy stocks took a beating last year due to the coronavirus pandemic and the resultant government policies — lockdown and border closures — which weakened the demand for fossil fuels (e.g. aviation fuel) and disrupted their supply chains. With economies opening up, and international travel hopefully getting back to normal soon, it’s a good time to look at the best energy stocks to buy this year, including renewable energy stocks.

Where Can I Trade Energy Stocks

Energy stocks are traded on stock exchanges such as the New York Stock Exchange (NYSE), the Nasdaq exchange, or the London Stock Exchange (LSE). Since you can’t interact directly with these exchanges, you need the services of a stockbroker: either a full-service broker or an execution-only discount broker. To save you some time when searching for a broker, we have shortlisted some.

1
SolarEdge (SEDG)
User Score
10
SolarEdge provides smart energy technology solutions including power optimisers and solar inverters.
Solaredge Market Cap of $14.89B as of February 2021.
The company has had a strong return in the last five years with more than 240% gains in 2020
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2
First Solar (FSLR)
User Score
9.3
US-Based First Solar was considered as one of "The Smartest Companies of 2017" by the MIT
FSLR manufacture and sell photovoltaic (PV) solar systems and PV powe plants
Quaterly revenues have grown at an annualized average of 13% (acc. Nasdaq)
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3
Valvoline Inc (VVV)
User Score
8.7
Valvoline was founded in 1866 and is headquartered in Kentucky.
Market Cap of 4.45B as of February 2021.
Earnings to grow 6.16% per year.
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4
ConocoPhillips (COP)
User Score
8.5
ConocoPhilips was founded in 1917 and is headquartered in Texas.
Market Cap of 68.93B as of February 2021.
Dividend yield at about 4.23%.
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5
Vertex Pharmaceuticals (VRTX)
User Score
7.9
Pharmaceuticals company focused on medical research for serious and genetic diseases
The company went public on Nasdaq in 1991
Over the last decade, VRTX stocks have outshined other companies in the biotech sector
Description:
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What Are Energy Stocks?

Energy stocks are stocks of companies whose businesses are related to the production and supply of energy, whether renewable or non-renewable energy. Uses of energy include powering our vehicles and machinery, heating our homes, cooking our dinners, and lighting our cities.

The companies in the energy sector include those that are involved in the exploration, mining, processing/refining, storage, transportation, and marketing/distribution of petroleum products, natural gas, coal, and other consumable fuels. They also include companies that produce electricity from fossil fuels (coal, natural gas), nuclear reactions, or renewable sources (hydropower, wind, or solar) and those that distribute the electricity. Companies that supply oil and gas equipment or provide key services to the industry are also considered part of the energy sector.

In the case of non-renewable energy, it is important to note that energy stocks are affected by anything that affects the underlying commodities — coal, oil, or natural gas — that are burned to produce the energy. Therefore, anyone intending to trade energy stocks should have an eye on the commodity markets.

How to Trade and Invest in Energy Stocks?

1

Open a Trading Account

Open a trading account with an online broker and fund it with an initial amount. Filling out an online application form is easy but you will likely have to upload some proof of identity and address. When your account is approved, you can typically deposit trading funds by bank transfer, credit/debit card, or other methods such as PayPal.

2

Choose the Energy Stocks to Trade

Your criteria for choosing the best energy stocks to buy will be based on information about the companies, such as improved earnings, new management, or new products or services. We have helped you by suggesting some candidate companies in this guide. You should find them easily on your broker’s trading platform by entering the relevant ticker symbol; e.g., CVX for Chevron.

3

Place Your Trade Order

Your broker should let you buy your chosen stock(s) immediately at the market price or by placing a “limit order” to buy the stock at a later time for no more than a maximum price you specify. The stocks you own will be shown on the broker’s platform, so you can monitor them until it’s time to sell, and you can protect your position(s) by placing stop orders that will automatically sell you out at a predefined loss if your trades go against you.

Top 10 Energy Stocks to Trade

Our candidate list of the ten best energy stocks to trade in 2021 has been compiled to include undervalued stocks that have good profit-making potential.

  1. Chevron (NYSE: CVX) 
  2. ConocoPhillips (NYSE: COP)
  3. Clearway Energy (NYSE: CWEN)
  4. SolarEdge Technologies Inc (NASDAQ: SEDG)
  5. Cheniere Energy Inc. (NYSE: LNG)
  6. Total (NYSE: TOT)
  7. ONEOK Inc. (NYSE: OKE)
  8. First Solar (NASDAQ: FSLR)
  9. Sunrun Inc (NASDAQ: RUN)
  10. Valvoline Inc. (NYSE: VVV)

1. Chevron (NYSE: CVX) 

Chevron provides administrative, financial management, and technology support for integrated petroleum operations, including mining operations, power generation, and energy services. The company is known for consistently paying high dividends for 32 years. In July 2020, Chevron announced that it had agreed to acquire Noble Energy (NASDAQ: NBL) in an all-stock deal.

Chevron shares fell precipitously in the first three months of 2021 but then bumpily rebounded to recoup about three-quarters of the losses by June.

2. ConocoPhillips (NYSE: COP)

ConocoPhillips’s business is in the exploration, production, transportation, and the supply of crude oil, bitumen, natural gas, natural gas liquids, and liquefied natural gas worldwide. ConocoPhillips’ acquisition of Concho Resources (CXO) in an all-stock deal valued at about $10 billion set it on a course for expansion.

Like Chevron, ConcocoPhilips shares fell precipitously in the first three months of 2021 but then recovered most of the losses by June.

3. Clearway Energy (NYSE: CWEN)

Clearway Energy is one of the large operators of clean energy in the United States, generating over 4.7 gigawatts of wind and solar energy. The company increased its dividend payout by 59% last year and is also investing in new projects to increase solar energy production.

Clearway Energy shares more than doubled in value between March 2020 and January 2021 before giving back almost half of that increase by May 2021. 

4. SolarEdge Technologies Inc (NASDAQ: SEDG)

SolarEdge Technologies is an Israel-based large-cap company that engages in the development of smart energy technology. The company produces power optimizers, solar inverters, and monitoring systems for photovoltaic arrays. Its market capitalization makes it one of the largest clean energy companies

SolarEdge Technologies shares rose more than fivefold between March 2020 and January 2021 before giving back about half of those gains by May 2021.

5. Cheniere Energy Inc. (NYSE: LNG)

Headquartered in Houston, Texas, Cheniere Energy Inc. is an energy company that engages in liquefied natural gas (LNG) related businesses. The company owns and operates LNG terminals and pipelines.

Cheniere Energy shares rebounded from the March 2020 low point to stand at 35% above the pre-pandemic share price by June 2021.

Expert Tip on Investing in Energy Stocks

Although fossil fuels will benefit in the short term from the reopening of economies, longer-term traders will be more interested in renewable energy providers that will eventually supplant the energy “old guard”. Many of the stalwart old energy companies are looking to transition through renewable energy initiatives.
- Tony Loton

Why Invest in Energy Stocks?

You should invest in energy stocks if you think that the reopening of economies will boost the need for fossil fuels such as aviation fuel. You should invest in renewable energy companies — or those transitioning to renewable sources — if you believe that this is the future of energy generation.

Frequently Asked Questions

  1. We have suggested several candidate energy stocks to buy. You don’t need to choose one of them because it’s always a good idea to diversify within and outside a stock sector.

  2. Investing in energy stocks could be a good idea in the short term (as economies reopen) and the long term (as we transition to renewable sources).

  3. Many energy stocks are in good financial positions, but the market is very dynamic, so the strongest stock today might not be the strongest stock tomorrow.

  4. As long as you meet the requirements to open a brokerage account, you can invest in energy stocks.

  5. Beginners investing in energy stocks should diversify by buying several stocks within the sector, and several from other sectors, to build a portfolio that isn’t dependent on the performance of any single stock that could go bust.

  6. Everything we do is dependent on energy. But from an investment viewpoint, there are two themes: the long-term trend towards renewable energy, and the short-term reopening of economies that should boost demand for fossil fuels.

  7. No, the stock markets have opening and closing hours, which are from 8 am to 4.30 pm at the London Stock Exchange and similar times (in Eastern Time) for the New York Stock Exchange (NYSE) and Nasdaq.

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