In this article, we will look at the 7 Best Cheap Energy Stocks to Invest in Now.
The global energy landscape is going through a major transformation due to rapid technological advances, shifting market dynamics, and geopolitical factors. The energy sector used to make up about 15% of the broader U.S. stock market in the 1970s, but today it accounts for only 3.2%. Despite its diminished index weighting, energy consumption is still rising, and the sector remains a crucial part of the global economy.
An important factor driving this change is the rapid switch to renewable energy. According to IEA, the world’s renewable energy capacity increased by 50% in 2023 compared to 2022, the largest increase in three decades. While Europe continues to grow its sustainable energy projects, major players like China, the United States, and Brazil have made historic investments. This momentum is in line with international agreements to triple the renewable energy capacity by 2030, a target that was highlighted at the COP28 summit. However, there is still a significant obstacle to overcome: obtaining sufficient funding for emerging markets. This will be essential in deciding whether the world can accomplish its clean energy goals.
Although the shift to renewable energy is taking center stage, conventional energy sources still contribute significantly to the world’s energy balance. McKinsey & Company projects that the rapid industrialization of emerging economies will be a major factor in the 11%–18% increase in global energy demand by 2050. It is anticipated that up to 95% of this increase will come from ASEAN, India, and the Middle East, driven by the growing middle class and expanding manufacturing sectors. Their geopolitical significance is expected to grow as these areas redefine international influence and trade. Oil and gas are anticipated to continue to play a significant role in the energy mix despite international attempts to move away from fossil fuels, particularly in industries where the adoption of alternative energy is slow.
Additionally, supply issues and geopolitical conflicts have contributed to the ongoing volatility of the oil market. According to the UK Parliament, wholesale energy prices hit all-time highs in 2022, and though they slightly decreased in 2024, the cost of gas and electricity is still far higher than it was before the crisis.
Accordingly, in late 2024, energy stocks had substantial fluctuations, rising 6% in November and then falling 10% in December. The energy sector reported a modest 5.72% return at the end of the year, falling short of broader market gains. Several factors contributed to this instability, such as fluctuating investor sentiment, reduced demand from big economies like China and Europe, and uncertainty around OPEC+ supply plans. To maintain investor confidence in these uncertain times, many oil supermajors have responded by refocusing on providing strong returns to shareholders. Some even relied on debt to fund buybacks.
Investors are increasingly searching for energy companies that provide a balance between stability, growth potential, and strong shareholder returns during these changes. Traditional energy companies continue to be appealing because of their consistent cash flows, low valuations, and high dividend yields, even as the renewable energy sector continues to grow at an unprecedented rate. Additionally, the combination of new technologies like battery storage, hydrogen, and hybrid power solutions is opening new investment opportunities in both the clean energy and fossil fuel sectors. You can read more about the utilization of hydrogen as an energy source here. The future of energy in this dynamic setting depends on embracing the innovations that will influence tomorrow’s energy systems and striking a balance between conventional and renewable energy sources.
With this, let’s look at the 7 Best Cheap Energy Stocks to Invest in Now.
An aerial view of an energy refinery, with massive tanks and piping defining the landscape.
Methodology
To compile our list of the 7 Best Cheap Energy Stocks to Invest in Now, we used Finviz stock screener to identify the 16 largest energy companies trading below a forward P/E ratio of 15, as of writing the article. We refined our selection by ensuring that these companies had significant market capitalizations and strong fundamentals.
Next, we analyzed the number of hedge funds holding positions in these companies using Insider Monkey’s Q4 hedge fund database. We picked the seven stocks with the highest number of hedge fund holders, as we believe that stocks with strong hedge fund interest tend to perform well. The companies were then ranked in ascending order based on hedge fund sentiment.
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).
7. NewMarket Corporation (NYSE:NEU)
Number of Hedge Fund Holders: 18
P/E Ratio: 11.51
NewMarket Corporation (NYSE:NEU) stands as a major force in the petroleum additives field, producing lubricant and fuel additives that boost engine performance and efficiency. The company works through subsidiaries like Afton Chemical and Ethyl Corporation, meeting global needs. With roots going back to 1887, NewMarket remains a vital supplier in the energy sector, ensuring the optimization of petroleum-based products.
For the quarter ending December 31, 2024, NewMarket Corporation (NYSE:NEU) had strong financial results. Net income reached $111 million, up from $80 million in Q4 2023, translating to earnings per share (EPS) of $11.56 versus $8.38 in the same quarter last year. The full-year 2024 net income hit $462 million, marking a solid jump from $389 million in 2023.
NewMarket Corporation (NYSE:NEU)’s stock has climbed 11.66% year-to-date, backed by strong profits and smart planning. The company has been working on cutting costs while investing in advanced tech to stay ahead of the market competitors. It also expanded its portfolio by acquiring American Pacific Corporation (AMPAC), which makes specialty materials for solid rocket motors, in early 2024, further diversifying its revenue streams.
Beyond just making operations better, NewMarket Corporation (NYSE:NEU) raised its quarterly dividend by 10% to $2.75 per share, showing faith in its cash flow and dedication to giving back to shareholders. Additionally, the company’s board gave the green light to a new $500 million share buyback plan running through 2027, pointing to strong financial health and a shareholder-friendly approach.
With a healthy balance sheet, better profit margins, and ongoing investment in tech advances, NewMarket Corporation (NYSE:NEU) stays well-positioned in the petroleum additives market. The stock’s steadiness, backed by efficient operations and shareholders incentives, makes it an attractive pick in the energy sector. Given its strong fundamentals, the stock earns a place among the 7 Best Cheap Energy Stocks to Invest in Now.
6. APA Corporation (NASDAQ:APA)
Number of Hedge Fund Holders: 34
P/E Ratio: 3.48
APA Corporation (NASDAQ:APA) is an independent energy company that mainly focuses on the exploration of natural gas, crude oil, and natural gas liquids. With its headquarters in Houston, Texas, it manages important assets in the North Sea, Egypt, and the United States while expanding into Uruguay and Suriname.
APA Corporation (NASDAQ:APA) reported strong financial results for the quarter and year ended December 31, 2024. The results included adjusted net income of $290 million ($0.79 per share) and Q4 net income of $354 million ($0.96 per share). During the quarter, the company generated $420 million in free cash flow, returning 71% of its profits to shareholders through dividends and $100 million in share repurchases.
APA’s position was further strengthened in 2024 by strategic decisions. A new gas price agreement in Egypt opened more drilling options, while the purchase of Cowen in the Permian Basin boosted capital efficiency. Additionally, the company made a final investment decision in Suriname on the Grand Morgue project, which is anticipated to produce 220,000 barrels per day by 2028.
Despite the company’s achievements, APA Corporation (NASDAQ:APA) faced several challenges, primarily higher depreciation expenses and cost pressures from its legacy Fieldwood properties. The company is tackling these issues through cost-saving policies, with a target of $350 million in annualized savings by 2027. It is focusing on boosting shareholder value, optimizing operations, and managing costs efficiently.
Thus, APA Corporation (NASDAQ:APA) presents a strong investment opportunity due to its diverse portfolio, disciplined capital allocation, and a clear path toward cost efficiency. Owing to these factors, the company is included in our list of the 7 Best Cheap Energy Stocks to Invest in Now.
5. Matador Resources Company (NYSE:MTDR)
Number of Hedge Fund Holders: 38
P/E Ratio: 7.48
Matador Resources Company (NYSE:MTDR) is an energy company with a focus on the exploration, development, and production of oil and natural gas. It has a major presence in the Delaware Basin, though it also operates in the Eagle Ford and Haynesville Shale, where it oversees midstream operations that support its energy production.
For Q4 ending December 31, 2024, Matador Resources Company (NYSE:MTDR) reported record operational performance. The company posted its highest-ever quarterly average daily production of 201,116 barrels of oil equivalent (BOE), marking a 30% increase from Q4 2023. The company also reported great results for natural gas and oil production. Oil production surged by 34% to 118,440 barrels per day, while natural gas production rose 26% to 496.1 million cubic feet per day. Matador’s total proved reserves also grew by 33% to 611.5 million BOE, demonstrating strong asset value growth.
Additionally, Matador Resources Company’s (NYSE:MTDR) batch drilling strategy allowed the company to save almost $30 million to $50 million. The company also lowered its cost per completed lateral foot by 11% to $910 due to operational efficiencies such as ‘U-Turn’ wells and ‘simul-frac’ completions. The company was also able to expand its footprint by acquiring nearly 50,000 net acres in 2024, bringing its total Delaware Basin acreage to 200,000 net acres and increasing its inventory of net drilling locations by 22%.
Matador displayed its commitment to shareholder returns with a 25% dividend increase, raising its annual dividend from $1.00 to $1.25 per share. This marks the sixth dividend increase in four years, highlighting both its strong financial position and its dedication to rewarding shareholders.
Matador Resources Company (NYSE:MTDR)’s year-over-year expansion and efficiency measures reflect a solid growth trajectory. The company has a strong asset base and strategic development plans, positioning it as a compelling investment in the energy sector.
4. Ovintiv Inc. (NYSE:OVV)
Number of Hedge Fund Holders: 51
P/E Ratio: 5.77
Ovintiv Inc. (NYSE:OVV) is a North American energy producer that primarily focuses on optimizing its oil and gas assets to maximize both efficiency and profitability. With operations spanning key regions such as the Permian, Montney, and Anadarko, the company has curated a robust inventory of premium drilling locations while maintaining a disciplined approach to capital management.
Ovintiv Inc. (NYSE:OVV) displayed strong financial and operational performance in Q4 ended December 31, 2024. The company generated free cash flow of approximately $1.7 billion for the full year, up 50% year-over-year, while returning over $900 million to shareholders through dividends and buybacks. It maintained capital spending discipline, achieving a cash flow per share of $3.86, beating consensus estimates by 7%.
One of the company’s major accomplishments was the acquisition of Montney assets from Paramount Resources Ltd, in 2024. The $2.3 billion deal added 70,000 barrels of oil equivalent per day (Mboe/d) and 900 high-quality drilling locations, significantly expanding Ovintiv Inc. (NYSE:OVV)’s premium oil and condensate inventory. The divestiture of Uinta assets is expected to drive long-term free cash flow growth, with 2025 projections showing an increase of $300 million based on prevailing market rates.
Ovintiv Inc. (NYSE:OVV)’s focus remains on operational efficiency to secure a strong position in the energy sector. It aims to leverage design innovations and drilling advancements to lower costs and enhance output. The disciplined capital allocation and a focus on high-return assets make the company a strong competitor for the 7 Best Cheap Energy Stocks to Invest in Now.
3. Cummins Inc. (NYSE:CMI)
Number of Hedge Fund Holders: 53
P/E Ratio: 12.71
Cummins Inc. (NYSE:CMI) is a frontrunner in diesel, natural gas, and electric power systems, meeting global needs through its various business units. The company is growing its industrial power lineup while making progress in cutting carbon.
For the fourth quarter that ended December 31, 2024, Cummins Inc. (NYSE:CMI) posted $8.4 billion in revenue, down 1% from last year due to weaker North American truck demand and the Atmus split-off. Yet, full-year sales reached $34.1 billion, showing strong interest in power generation and aftermarket services. Adjusted EBITDA for Q4 hit $1.3 billion, while full-year EBITDA set a record at $6.3 billion. The Power Systems Unit, a key performer, showed 18.4% EBITDA margins, up from 14.7% in 2023.
To reinforce its clean energy portfolio, Cummins Inc. (NYSE:CMI) acquired certain assets from First Mode, a company that makes hybrid retrofit solutions for mining and rail applications. The purchase includes hydrogen and battery drive technology, supporting the company’s push toward lower carbon emissions. Furthermore, Cummins partnered with Liberty Energy Inc. to roll out a variable-speed natural gas engine for fracking, boosting fuel efficiency and reducing emissions.
Looking ahead, Cummins Inc. (NYSE:CMI) expects 2025 revenue to range between a 2% decline and 3% growth, with EBITDA margins forecast at 16.2% to 17.2%. While demand for trucks in North America may soften in early 2025, steady demand for power generation and aftermarket services should provide stability. With its focus on new ideas and careful capital management, Cummins remains a good cheap energy stock to consider in today’s market.
2. Diamondback Energy, Inc. (NASDAQ:FANG)
Number of Hedge Fund Holders: 53
P/E Ratio: 10.06
Diamondback Energy, Inc. (NASDAQ:FANG) has been strengthening its presence in the Permian Basin through smart buyouts and capital management. The company has grown its top-tier drilling sites while maintaining a solid free cash flow and returns to shareholders.
For the quarter ending December 31, 2024, Diamondback Energy, Inc. (NASDAQ:FANG) reported $1.1 billion in net income, or $3.67 per share after dilution. Adjusted net income hit $3.64 per share, beating forecasts. The company had $2.3 billion in operating cash flow and $1.4 billion in adjusted free cash flow, reflecting its strong financial health.
Diamondback Energy, Inc. (NASDAQ:FANG)’s production rose to 475,900 barrels of oil per day, a 91% increase from the same period last year. This boost came from integrating Endeavor Energy, which the company acquired in 2024 for $26 billion. Looking forward, it expects full-year 2025 production will range from 883,000 to 909,000 BOE/d, with oil output projected at 485,000 to 498,000 barrels per day.
Diamondback Energy, Inc. (NASDAQ:FANG) is committed to selling at least $1.5 billion in non-core assets, aiming for long-term net debt cuts to $6-8 billion. At year-end 2024, net debt was $13.2 billion, with over $2.6 billion in cash on hand. The company also increased its yearly base dividend by 11% to $4.00 per share and bought back $402 million in shares during Q4.
With careful capital management and a growing presence in the Permian Basin, Diamondback Energy, Inc. (NASDAQ:FANG) is well-positioned for long-term value growth, making it a top pick among the best cheap energy stocks to buy now.
1. Permian Resources Corporation (NYSE:PR)
Number of Hedge Fund Holders: 54
P/E Ratio: 8.48
Permian Resources Corporation (NYSE:PR) stands as a top independent oil and natural gas producer focused on developing premium assets in the Delaware Basin. For the quarter ending December 31, 2024, the company achieved record production levels, averaging 368,000 barrels of oil equivalent per day. This strong output, paired with a sharp focus on cutting costs, led to an adjusted operating cash flow of $904 million and an adjusted free cash flow of $400 million.
Permian Resources Corporation (NYSE:PR) also declared a quarterly base dividend of $0.15 per share, showing its commitment to returning value to shareholders. Permian Resources also completed mergers throughout 2024, worth $1.2 billion, adding 50,000 net acres and about 20,000 BOE/d of output across its Delaware Basin holdings. Remarkably, the company cut well costs by 20% in comparison to 2023, with over half the savings coming from structural efficiency gains.
Looking toward 2025, Permian Resources Corporation (NYSE:PR) expects total production to range from 300,000 to 380,000 BOE/d, with oil output expected to reach between 170,000 and 175,000 barrels per day. The company plans to spend roughly $2 billion in capital investment while keeping a solid balance sheet, aiming for a leverage ratio of 0.5x by year-end.
By focusing on cost leadership, smart acquisitions, and careful capital use, Permian Resources keeps generating strong free cash flow and driving long-term shareholder value, making it one of the most appealing and low-cost energy stocks to buy.
Overall Permian Resources Corporation (NYSE:PR) ranks first on our list of the Best Cheap Energy Stocks to Invest in Now. While we acknowledge the potential of PR, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than PR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
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