In this piece, we will take a look at the 13 cheap energy stocks to buy. If you want to skip our overview of the energy industry and some recent trends, then check out 5 Cheap Energy Stocks To Buy.
Despite the global push towards renewable energy and emissions free vehicles, the global fossil fuel energy industry remains as important as ever. The post coronavirus era, marked by the Russian invasion of Ukraine and the conflict in the Middle East shows that energy supply chains are as volatile as ever and can create economic damage in the case of a geopolitical crisis.
At the same time, even if it were not for conflicts, fossil fuels will continue to play a central role in the global economy simply due to population and growth dynamics. While the Western world, made of regions such as the United States and Europe has moved away from agriculture and manufacturing economies to more emissions friendly services, other regions are just starting to experience the benefits and wealth of economic growth powered by large scale transportation, mass production, and industrialization.
This development comes at the cost of the environment and it makes the need for the shift to renewables even more important. For instance, consider a report from the International Monetary Fund (IMF). It shares that temperatures are rising twice as fast in Asia than the global average, and the fact that the region produces half of the world’s carbon dioxide and features five of the biggest carbon dioxide emissions producers in the world undoubtedly play a central role in these climate woes. The IMF’s data also matches our research as part of the 25 Countries that Produce the most Carbon Dioxide Emissions, with the five biggest emitters being Saudi Arabia, Kuwait, Bahrain, Qatar, and the United Arab Emirates – all Western Asian countries.
These days, the energy industry is facing jitters once again due to political conflict in the Middle East. Hamas’s attack on Israel, which started on October 7th saw oil prices rally to $93 a barrel in mid October as investors worried whether the broader region would become embroiled in conflict and threaten precarious oil supplies. However, restraint showed by Saudi Arabia, one of the world’s biggest oil producers, and Qatar which plays a crucial role in the liquefied natural gas (LNG) industry saw these worries dissipate in early November. This caused oil prices to stabilize and dip to multi month lows and trade at $84 a barrel.
At the start of this year, one major stimulus for global oil demand was believed to be China’s economic recovery after it eliminated a Zero COVID policy. However, Chinese economic growth has been slow, and this has also affected oil prices. Data from China showed that the Asian economic giant’s oil imports stood at 11.53 million barrels per day in October 2023, which marked a 13.5% annual growth as oil refining companies beefed up their inventories ahead of a holiday season. The annual growth in October was met by growth in China’s year to date oil imports as well, which stood at 11.36 million barrels per day for the first 10 months of 2023 for a 14.4% annual growth.
However, while an uptick in oil imports from the second most populous countries in the world is a positive development for the oil industry, another data set continued to cast doubts on China’s economy. Chinese exports shrank by 6.4% annually in October 2023, indicating that its industrial output is still far from reaching preferred levels. For oil, naturally, this is a bearish indicator since slowing industrial and manufacturing output is unlikely to bolster oil demand. This slowing Chinese demand and a global economy fraught with high interest rates is also on the radar of Saudi Arabia and Russia, as the pair have reaffirmed 1.3 million daily oil production cuts until December 2023 to ensure that crude oil prices remain sufficiently high to help bolster their budgets.
So, with the oil sector being as dynamic as ever, we decided to look at some cheap energy stocks. In this list, the cheapest stocks are Vital Energy, Inc. (NYSE:VTLE), GeoPark Limited (NYSE:GPRK), and VAALCO Energy, Inc. (NYSE:EGY).
A view of a large hydroelectric dam, its turbines churning out renewable energy.
Our Methodology
To compile our list of the cheap energy stocks to buy, we first sifted forty energy companies with a market capitalization greater than $300 million and the lowest price to forward earnings ratios. Then, those with the lowest price to forward earnings ratios were selected as the cheapest energy stocks to buy.
13 Cheap Energy Stocks To Buy
13. International Seaways, Inc. (NYSE:INSW)
Forward Price To Earnings Ratio: 4.9
Number of Hedge Fund Investors In Q2 2023: 29
International Seaways, Inc. (NYSE:INSW) is an oil transportation company that operates tankers for ocean transport. It marks a strong start to our list of cheap energy stocks to buy, since not only does International Seaways, Inc. (NYSE:INSW) have a low P/E ratio of 4.9, but its shares are also rated Strong Buy on average.
Insider Monkey dug through 910 hedge funds for their second quarter of 2023 shareholdings and discovered that 29 were International Seaways, Inc. (NYSE:INSW)’s investors. Out of these, the largest shareholder is Jeremy Hosking’s Hosking Partners as it owns $30.7 million worth of shares.
International Seaways, Inc. (NYSE:INSW) joins GeoPark Limited (NYSE:GPRK), Vital Energy, Inc. (NYSE:VTLE), and VAALCO Energy, Inc. (NYSE:EGY) in our list of the cheap energy stocks to buy.
12. Precision Drilling Corporation (NYSE:PDS)
Forward Price To Earnings Ratio: 4.77
Number of Hedge Fund Investors In Q2 2023: 13
Precision Drilling Corporation (NYSE:PDS) is a Canadian backend oil exploration firm that operates drilling rigs all over the world. It was one of the first energy companies to release results during the Q3 2023 earnings season, and Precision Drilling Corporation (NYSE:PDS)’s third quarter earnings report saw its revenue grow by 4% annually on the back of higher drill rates.
During the prior quarter, 13 out of the 910 hedge funds tracked by Insider Monkey had held a stake in the drilling company. Precision Drilling Corporation (NYSE:PDS)’s biggest hedge fund investor is Todd J. Kantor’s Encompass Capital Advisors as it owns 742,285 shares that are worth $36.2 million.
11. Alliance Resource Partners, L.P. (NASDAQ:ARLP)
Forward Price To Earnings Ratio: 4.24
Number of Hedge Fund Investors In Q2 2023: 7
Alliance Resource Partners, L.P. (NASDAQ:ARLP) is an American coal company with more than half a billion tons of provable coal reserves. Despite the fact that coal is on its way out in the world’s energy mix, Alliance Resource Partners, L.P. (NASDAQ:ARLP)’s shares are rated Strong Buy on average and analysts have set an average share price target of $28.67.
By the end of this year’s June quarter, seven out of the 910 hedge funds tracked by Insider Monkey had bought and invested in Alliance Resource Partners, L.P. (NASDAQ:ARLP)’s shares. Adam Peterson’s Magnolia Capital Fund owns the largest stake among these, which is worth $52.6 million.
10. Kosmos Energy Ltd. (NYSE:KOS)
Forward Price To Earnings Ratio: 4.23
Number of Hedge Fund Investors In Q2 2023: 21
Kosmos Energy Ltd. (NYSE:KOS) is a small oil and gas exploration and production company with operations in the U.S. and in Africa. The firm has teamed up with energy giant BP to develop an LNG plant in Senegal, and the site’s production timeline has slipped after BP switched a pipeline system supplier.
During 2023’s second quarter, 21 out of the 910 hedge funds polled by Insider Monkey had held a stake in the company. Kosmos Energy Ltd. (NYSE:KOS)’s biggest hedge fund investor is Todd J. Kantor’s Encompass Capital Advisors as it owns 10.4 million shares that are worth $62.7 million.
9. TORM plc (NASDAQ:TRMD)
Forward Price To Earnings Ratio: 4.20
Number of Hedge Fund Investors In Q2 2023: 11
TORM plc (NASDAQ:TRMD) is a British oil and gas transportation company. The firm has benefited from the turmoil in the energy industry this year, with its H1 2023 revenue jumping by 41% annually and second quarter operating income growing by 23%.
In the same quarter, 11 among the 910 hedge funds part of Insider Monkey’s database were TORM plc (NASDAQ:TRMD)’s investors. Out of these, the largest shareholder is Howard Marks’ Oaktree Capital Management courtesy of its $1.2 billion investment.
8. Scorpio Tankers Inc. (NYSE:STNG)
Forward Price To Earnings Ratio: 4.18
Number of Hedge Fund Investors In Q2 2023: 31
Scorpio Tankers Inc. (NYSE:STNG), as the name suggests, is an oil tanker company. It has more than a hundred vessels in its fleet. When it comes to its average analyst share price target, the value sits at $72.26 in a sizeable price upside over the current share price of $55.55.
As of June 2023 end, 31 out of the 910 hedge funds profiled by Insider Monkey had bought the firm’s shares. Scorpio Tankers Inc. (NYSE:STNG)’s biggest investor among these is Kerr Neilson’s Platinum Asset Management since it owns $51.3 million worth of shares.
7. Riley Exploration Permian, Inc. (NYSE:REPX)
Forward Price To Earnings Ratio: 4.09
Number of Hedge Fund Investors In Q2 2023: 5
Riley Exploration Permian, Inc. (NYSE:REPX) is an American oil production company with operations in New Mexico and Texas. Its third quarter of 2023 results, released at the close of November’s first week, saw Riley Exploration Permian, Inc. (NYSE:REPX) beat analyst revenue estimates by $12 million but miss the EPS estimates by 9 cents.
Out of the 910 hedge fund portfolios part of Insider Monkey’s second quarter of 2023 research, five had held a stake in Riley Exploration Permian, Inc. (NYSE:REPX).
6. Callon Petroleum Company (NYSE:CPE)
Forward Price To Earnings Ratio: 4.07
Number of Hedge Fund Investors In Q2 2023: 19
Callon Petroleum Company (NYSE:CPE) is a Texas based oil company. Its third quarter of 2023 earnings saw the firm reduce its full year oil production guidance and post $119.5 million in net income.
Insider Monkey’s Q2 2023 research of 910 hedge fund investments revealed that 19 had bought the firm’s shares. Ryan Schedler and Bradley Shisler’s Condire Investors owns the largest stake in Callon Petroleum Company (NYSE:CPE) among these, which is worth $52 million and comes via 1.4 million shares.
Vital Energy, Inc. (NYSE:VTLE), Callon Petroleum Company (NYSE:CPE), GeoPark Limited (NYSE:GPRK), and VAALCO Energy, Inc. (NYSE:EGY) are some top cheap energy stocks to buy.
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Disclosure: None. 13 Cheap Energy Stocks To Buy is originally published on Insider Monkey.