On March 18, Tortoise Capital senior portfolio manager Rob Thummel appeared on CNBC’s ‘Squawk on the Street’ to discuss his outlook on the energy sector. He believes that natural gas is positioned to lead growth in the future within the energy sector. This natural gas demand is driven by electricity and energy exports. Thummel noted that the energy and tech sectors are converging due to advancements like AI and data centers. Electricity demand fuels natural gas consumption, while US energy exports help meet global needs for low-cost and low-carbon energy. He also highlighted that the US is now emerging as the largest exporter of LNG, even though it was an LNG importer just years ago. He anticipates that the US LNG exports will soon 2x in volume over time. Thummel also expects Europe and other countries to prioritize energy security and diversify their supply sources. This will ensure reliance on US energy exports.
Thummel emphasized a focus on energy infrastructure companies while discussing his specific investment strategies as they tend to be stable and have high dividend yields even in uncertain market conditions. He thinks that the certainty provided by energy infrastructure investments in an otherwise volatile market should not be neglected. Such companies generate substantial annual cash flows while maintaining disciplined financial practices.
Thummel thinks that the energy sector trades at a discount to historical valuations despite its fundamentals. This offers the potential for high returns. With that being said, we’re here with a list of the 11 best undervalued energy stocks to invest in now.
A vast oil and gas rig silhouetted in the sunset, capturing the power of Swift Energy Company.
Our Methodology
We used the Finviz stock screener to compile a list of the top energy stocks that had a forward P/E ratio under 15 as of April 10. We then selected the 11 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q4 2024. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 1000 elite money managers.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
11 Best Undervalued Energy Stocks to Invest in Now
11. Shell (NYSE:SHEL)
Forward P/E Ratio as of April 10: 8.23
Number of Hedge Fund Holders: 54
Shell (NYSE:SHEL) is an energy and petrochemical company that operates through Integrated Gas, Upstream, Marketing, Chemicals & Products, and Renewables & Energy Solutions segments. It explores and extracts crude oil and natural gas liquids, along with natural gas to produce liquefied natural gas or convert it into gas-to-liquid products, and operates upstream and midstream infrastructure to deliver gas to market.
The company’s Integrated Gas segment has a strong emphasis on LNG. The total sales volumes for LNG reached 15.5 million tonnes in 2024, with liquefaction volumes at 7.1 million tonnes. Shell (NYSE:SHEL) is expanding its global presence in LNG infrastructure with projects like LNG Canada and Prelude FLNG.
In February, the company awarded a $70 million contract to Noble for the use of its semi-submersible rig, called Noble Developer, in the Americas. This 180-day contract included mobilization and demobilization and is expected to commence in Q3 2026. Instances like the Pavilion acquisition and the Ruwais LNG project in Abu Dhabi also highlight the company’s commitment to making expansions in the global LNG market.
10. Canadian Natural Resources Ltd. (NYSE:CNQ)
Forward P/E Ratio as of April 10: 11.65
Number of Hedge Fund Holders: 54
Canadian Natural Resources Ltd. (NYSE:CNQ) acquires, explores, develops, produces, markets, and sells crude oil, natural gas, and natural gas liquids in Western Canada, the UK sector of the North Sea, and Offshore Africa. It offers light and medium crude oil, primary heavy crude oil, Pelican Lake heavy crude oil, bitumen (thermal oil), and synthetic crude oil (SCO).
In 2024, the company’s Oil Sands Mining & Upgrading segment achieved a record annual production of 472,245 barrels per day. The company’s acquisitions boosted the value of this segment’s assets. Notably, the acquisition of an additional working interest in the Albion Mines will consolidate 100% ownership and add ~93,500 barrels per day of long-life and zero-decline production. It’s targeted for completion by Q2 2025,
Since acquiring an initial interest in these assets in 2017, Canadian Natural Resources Ltd. (NYSE:CNQ) has focused on optimization. This resulted in a 30% increase in production at Albion Mines, which equated to 70,000+ barrels per day. The company also achieved a 30% reduction in per-unit operating costs, which translated to ~$10 per barrel savings and an incremental margin of $800 million based on 2024 production.