In this article, we discuss 11 oversold energy stocks you can buy right now. To skip the detailed analysis of the energy industry, go directly to the 5 Oversold Energy Stocks You Can Buy Right Now.
The energy sector recently experienced some of the most eventful and volatile years. However, from pandemic lows to Russia-Ukraine war highs, one thing remains constant, which is the global transition toward renewable energy due to the climate crisis. In our article about the fastest growing energy companies in the US, we reported that global energy investments rose to $2.8 trillion in 2023, and over 60% of those investments were made toward the renewable energy industry. This puts a bullish view on renewables because these investments were made despite the high borrowing rates. If the Federal Reserve decides to cut interest rates early, the investments could increase significantly.
Conventional energy or fossil fuels have been highly affected by geopolitical tensions around the world, including the war in the Middle East, which puts sector analysts in a tough spot. In 2022, oil majors such as Exxon Mobil Corporation (NYSE:XOM), TotalEnergies SE (NYSE:TTE), and Chevron Corporation (NYSE:CVX) posted record profits, which dropped significantly in 2023. Nevertheless, the companies still managed to rack up billions, especially in the third quarter of the year due to the Israel-Hamas conflict and Russia and OPEC’s announcement of production cuts.
Recent Performance of ETFs and Energy Outlook
From an investing point of view, fossil fuel stocks have outperformed renewable energy stocks by a wide margin since the latter hit their peak in 2021. Fossil fuels were the obvious winners of 2022. Furthermore, despite the declining oil prices and market downswings, fossil fuel companies remained strong compared to renewable energy companies. Even with large amounts of investments in the industry, the high interest rates still made a bear case for renewables in 2023. iShares Global Clean Energy ETF (ICLN) declined nearly 21.5% in the year, and Invesco WilderHill Clean Energy ETF (PBW) showed declines of over 22%. Compared to that, the Energy Select Sector SPDR Fund (XLE) was down by 4.15%.
Judging by the first two months of 2024, the fossil fuel industry is making progress while renewables are on a downward path. As of March 13, ICLN and PBW are down by 11% and 22.42% year-to-date, respectively. On the other hand, the XLE is up by 7.29%.
According to the US Energy Information Administration’s (EIA) short-term energy outlook (STEO) posted in February, crude oil prices may show strength in the first half of 2024. In January, Brent Crude prices averaged $80 per barrel, and EIA expects it to rise to the mid-80s range over the next few months. EIA expects downward pressures on oil prices in the second quarter of the year due to an increase in global oil inventories. However, the Red Sea attacks by Yemen’s Houthis could potentially drive the prices higher. The attacks’ latest victim was a British-owned MV Rubymar vessel, which was carrying fertilizers, as reported by the BBC on March 3. After the destruction of the vessel, Yemen’s deputy foreign minister posted on X (formerly Twitter) that they would “continue to sink more British ships.”
Natural gas prices averaged around $3.18 per million British thermal units (MMBtu) in January and at one point, reached $13.20 per MMBtu due to expectations of severely cold weather. In February and March, the EIA projected natural gas prices to average around $2.40 MMBtu.
While renewable energy stocks were beaten down in recent times, the EIA predicts that the total electricity production through renewables in the US will increase by 2 percentage points to 24% in 2024 and later to 26% in 2025. The upcoming Fed policies will also have a huge impact on renewable energy companies. In our article about the most promising energy stocks according to analysts, posted in the previous year, we reported significant gains in renewable ETFs when the Federal Reserve projected three rate cuts in 2024. You can also take a look at the best cheap clean energy stocks to buy according to analysts.
In the current environment, there are certain energy stocks that may be oversold and potentially trading at bargain levels. Let’s take a look at the most oversold energy stocks you can buy now according to hedge funds which include EQT Corporation (NYSE:EQT), Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR), and CONSOL Energy Inc. (NYSE:CEIX).
11 Oversold Energy Stocks You Can Buy Right Now
Our Methodology
For this article, we used the FinViz stock screener to identify energy stocks with a 14-day Relative Strength Index (RSI) of less than 40 as of March 13. The Relative Strength Index is a technical indicator that tracks momentum changes in stock prices. An RSI above 70 implies that a stock is overbought, and below 30 implies that the stock is oversold. These levels can be adjusted if needed. We chose the stocks with an RSI of under 40 as the median RSI of the energy industry is over 50.815, as of March 13, according to GuruFocus.
We selected stocks with the lowest 14-day RSIs that were the most widely held by hedge funds. The oversold energy stocks are listed in the ascending order of the number of hedge funds that have stakes in them. The hedge fund data was taken from Insider Monkey’s database of 933 elite hedge funds as of the fourth quarter of 2023. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.
11 Oversold Energy Stocks You Can Buy Right Now
11. NACCO Industries, Inc. (NYSE:NC)
14-day RSI: 26.10
Number of Hedge Fund Holders: 5
NACCO Industries, Inc. (NYSE:NC) is an operating holding company that, through its subsidiaries, works with coal in terms of mining, handling, processing, and drying.
On February 22, NACCO Industries, Inc. (NYSE:NC) declared a quarterly dividend of $0.2175, payable by March 15 to the shareholders of record on March 4. At the time of writing on March 13, the stock’s dividend yield is 2.99%.
According to Insider Monkey’s database that tracks 933 elite hedge funds, the number of hedge funds with investments in NACCO Industries, Inc. (NYSE:NC) remained the same, i.e. 5, the total dollar value went up to $10.7 million in Q4 from $4.34 million in Q3. Phil Frohlich’s Prescott Group Capital Management is the top investor in the company, with 63,039 shares worth $2.3 million, as of December 31, 2023.
With a 14-day RSI of 26.10, NACCO Industries, Inc. (NYSE:NC) is one of the oversold energy stocks you can buy right now, along with EQT Corporation (NYSE:EQT), Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR), and CONSOL Energy Inc. (NYSE:CEIX).
10. Cosan S.A. (NYSE:CSAN)
14-day RSI: 37.34
Number of Hedge Fund Holders: 7
Cosan S.A. (NYSE:CSAN) is a Brazilian company that produces bioethanol, sugar, and energy. At the time of writing on March 13, the stock has a 14-day RSI of 37.34. Cosan S.A. (NYSE:CSAN) takes the tenth spot on our list of oversold energy stocks you can buy right now.
In the fourth quarter, hedge fund sentiment was positive toward Cosan S.A. (NYSE:CSAN) as 7 funds held a stake in the stock, up from 5 in the previous quarter. As of December 31, Israel Englander’s Millennium Management owns 182,069 company shares worth $2.85 million and is the most significant stakeholder in the stock.
9. KLX Energy Services Holdings, Inc. (NASDAQ:KLXE)
14-day RSI: 28.08
Number of Hedge Fund Holders: 9
KLX Energy Services Holdings, Inc. (NASDAQ:KLXE) is a Texas-based company that provides oil field services to its clients in the U.S. The stock is oversold and potentially undervalued. As of March 13, KLX Energy Services Holdings, Inc. (NASDAQ:KLXE) has a 14-day RSI of 28.08 and is trading at a PE multiple of 5x.
9 hedge funds had investments in KLX Energy Services Holdings, Inc. (NASDAQ:KLXE)’s stock in the fourth quarter. Jeffrey Gendell’s Tontine Asset Management increased its stake by 2% to 1.5 million shares worth $17.19 million, representing 0.93% of the investment portfolio.
8. Energy Fuels Inc. (NYSE:UUUU)
14-day RSI: 38.39
Number of Hedge Fund Holders: 11
Energy Fuels Inc. (NYSE:UUUU) extracts, recovers, recycles, explores, evaluates, and sells uranium mineral properties in the U.S. Energy Fuels Inc. (NYSE:UUUU) has a 14-day RSI of 38.39 at the time of writing on March 13, making it one of the top oversold energy stocks. It is also trading at a price-to-earnings multiple of under 10x.
Energy Fuels Inc. (NYSE:UUUU) was a part of 11 hedge funds’ portfolios in the fourth quarter with positions worth $17.214 million. As of December 31, Daren Heitman’s Azarias Capital Management is the most significant shareholder in the company with a position worth $5.87 million.
According to TipRanks, 5 Wall Street analysts covered Energy Fuels Inc. (NYSE:UUUU) and all recommended a Buy rating for the stock. At the time of writing on March 13, the average price target of $10.62 implies an upside of 81.07%.
7. Ecopetrol S.A. (NYSE:EC)
14-day RSI: 33.38
Number of Hedge Fund Holders: 11
Ecopetrol S.A. (NYSE:EC), previously known as Empresa Colombiana de Petróleos S.A., is a Columbian company that is engaged in the exploration, development, and production of oil and gas.
On February 29, Ecopetrol S.A. (NYSE:EC) announced its fourth-quarter earnings result with a net income of COP 4.23 trillion (COP 1 = 0.00026 USD) and revenue of COP 34.79 trillion. At the time of writing on March 13, the stock has a 14-day RSI of 33.38 and a market cap of $21.925 billion.
11 hedge funds held positions in Ecopetrol S.A. (NYSE:EC) with positions worth $168.685 million in the fourth quarter. This is compared to 12 funds in the previous quarter and their stakes amounted to $136.226 million. As of December 31, Rajiv Jain’s GQG Partners is the biggest shareholder in the company. The firm increased its stake by 31% with a position worth $145.266 million.
Fairlight Capital made the following comment about Ecopetrol S.A. (NYSE:EC) in its Q3 2023 investor letter:
“Throughout the year, we have reviewed thousands of companies, including many in the oil sector. While we are generally cautious about commodity-based businesses where the company lacks control over the price of what it produces, the valuations in several cases have reached extremely compelling levels. For example, Petrobras (PBR) and Ecopetrol S.A. (NYSE:EC). Petrobras has distributed dividends of over $2.30 paid this year3 , while Ecopetrol has traded as cheaply as the $9-$10 range (close to our purchase price) and is paying approximately $2.50 in dividends this year.
We factor in the potential cost of FX movements over time, but even under the most pessimistic scenarios the investments should work out well. We initially came across these ideas while looking at South American stocks in general. We saw that many market commentators had expressed concerns that Ecopetrol’s dividends might be halted, especially following the election of Gustavo Petro as president of Colombia in June 2022. Similarly, there have been reservations about the sustainability of Petrobras’s dividend. However, the government owns substantial controlling stakes in these companies and is also a recipient of their dividends. For Ecopetrol, the Colombian government owes money to Ecopetrol due to the Fuel Price Stabilization Fund (FEPC). This fund aims to stabilize fuel prices for Colombian consumers. It bridges the gap between international and national Colombian consumer prices by compensating producers and importers for this price difference. The primary goal is to cushion the impact of global oil price fluctuations on the Colombian market. This is achieved either through cash payment or by forgoing dividend payments due from the government’s stake in these companies. In Ecopetrol’s case, the dividends paid (or those that would be paid to the government) are applied against the outstanding balances…” (Click here to read the full text)
6. Centrus Energy Corp. (NYSE:LEU)
14-day RSI: 35.01
Number of Hedge Fund Holders: 12
Centrus Energy Corp. (NYSE:LEU) is a Maryland-based company that supplies nuclear fuel components and services. The stock has a 14-day RSI of 35.01 at the time of writing on March 13.
On February 8, Centrus Energy Corp. (NYSE:LEU) announced its Q4 earnings result with a non-GAAP EPS of $3.58, which beat analysts’ estimates by $3.07. The company reported revenue of $103.6 million, beating estimates by $32.47 million.
According to Insider Monkey’s database, hedge fund sentiment was positive toward Centrus Energy Corp. (NYSE:LEU) in Q4 as the number of hedge funds with investments in the stock was 12 with a combined stake value of $28.249 million, compared to 6 funds with a total stake value of $7.2 million in Q3.
EQT Corporation (NYSE:EQT), Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR), and CONSOL Energy Inc. (NYSE:CEIX) are some of the most oversold energy stocks you can buy right now, in addition to Centrus Energy Corp. (NYSE:LEU).
Click to continue reading and see the 5 Oversold Energy Stocks You Can Buy Right Now.
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Disclosure. None. 11 Oversold Energy Stocks You Can Buy Right Now is originally published on Insider Monkey.
