We recently compiled a list of the 10 High Growth Energy Stocks To Invest In. In this article, we are going to take a look at where Diamondback Energy Inc. (NASDAQ:FANG) stands against the other high-growth energy stocks.
Investments in the Energy Sector Expected to Rise Amid Growing Demand?
The global energy industry is undergoing significant transformation, driven by the urgent need to address climate change and the increasing demand for cleaner energy sources. This sector is crucial not only for powering economies but also for ensuring energy security and sustainability. According to Infosys Limited, global investments in power generation are projected to reach approximately $3 trillion in 2024, with $2 trillion of that allocated to clean energy initiatives. This shift reflects a broader trend towards renewable sources such as solar and wind, which are becoming more competitive with traditional fossil fuels.
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Despite the push for clean energy, the oil and gas sector remains vital for energy security and economic stability. Companies are focusing on optimizing their portfolios and improving operational efficiencies. On December 16, Reuters reported oil and gas companies in Norway expect to make a record investment of NOK 275 billion ($24.68 billion) in 2025, according to a recent report by the Offshore Norge industry association. This marks an increase from NOK 263.7 billion this year and surpasses earlier forecasts. A year ago, the association had estimated investments for 2024 and 2025 would total NOK 240 billion and NOK 225.9 billion, respectively. The rise in investment is attributed to factors such as inflation, faster development timelines, and expanded project scopes, including additional drilling at existing sites.
In 2025, companies plan to drill 45 exploration wells in Norwegian waters, up from 41 this year, marking the highest level of activity since 2019. Norway is the largest oil and gas producer in Western Europe, with production exceeding 4 million barrels of oil equivalent per day. The outlook for investments indicates a gradual decline after 2025, with projections of NOK 251 billion in 2026 and NOK 203 billion by 2029 as current projects reach completion. This forecast is based on insights from 14 major companies that account for nearly all of Norway’s oil and gas output.
According to the Global Energy Perspective 2024 report by McKinsey & Company, global energy demand is projected to increase by 11% to 18% by 2050, mainly driven by emerging economies. These regions are experiencing population growth and a rising middle class, which leads to higher energy needs. Additionally, as manufacturing industries move from developed to developing countries, the demand for energy in these areas is expected to rise further.
Despite advancements in renewable energy sources, the transition to cleaner energy has been slower than anticipated. Key technologies are still not fully developed or cost-effective, meaning that renewables alone may not meet future energy demands. As a result, fossil fuels, including oil, natural gas, and coal, are projected to meet between 40% to 60% of global energy demand by 2050, down from 78% in 2023. Investment in fossil fuels is expected to persist for at least the next decade to keep pace with growing energy needs.
The future of the energy sector may depend on how effectively energy companies can adapt to changing market dynamics and invest in innovative technologies while meeting the growing demand for energy.
Methodology
To compile our list of the 10 high-growth energy stocks to invest in, we used stock screeners from Finviz and Yahoo Finance. We sorted our results based on market capitalization and picked the largest energy companies by market cap. We also consulted various online resources and reviewed our own rankings. This exercise provided us with a list of more than 60 energy stocks.
To narrow down our list to high-growth energy stocks, we focused on companies with a compound annual growth rate (CAGR) in net revenue exceeding 20% over the past 5 years. Finally, from this list of high-growth stocks that met our criteria, we focused on the top 10 stocks most favored by institutional investors. Data for the hedge fund sentiment surrounding each stock was taken from Insider Monkey’s Q3 2024 database of 900 elite hedge funds. The 10 high-growth energy stocks to invest in are ranked in ascending order based on the number of hedge funds holding stakes in them as of Q3 2024.
Why do we care about what hedge funds do? 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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A pipeline worker overseeing the flow of crude oil into storage tanks from an integrated water system.
Diamondback Energy Inc. (NASDAQ:FANG)
5-Year Revenue CAGR: 22.52%
Number of Hedge Fund Holders: 49
Diamondback Energy Inc. (NASDAQ:FANG) is an independent oil and natural gas company that focuses on the acquisition, development, exploration, and exploitation of oil and natural gas reserves in the Permian Basin in West Texas. Diamondback Energy Inc. (NASDAQ:FANG) ranks among the best high-growth stocks in the energy industry.
In the third quarter of 2024, the company drilled 71 wells in the Midland Basin and 5 in the Delaware Basin. Diamondback Energy Inc. (NASDAQ:FANG) successfully turned 87 wells into production in Midland and 8 in Delaware, showcasing its operational efficiency. With an average lateral length of 12,238 feet, these efforts underline the company’s commitment to maximizing resource extraction.
Diamondback Energy Inc. (NASDAQ:FANG) reported substantial capital expenditures of $688 million during the third quarter of 2024, which included $633 million on drilling and completions. The company also invested $52 million on infrastructure and environmental and $3 million on midstream. These investments reflect a robust strategy to enhance production capabilities and maintain growth momentum.
A notable highlight for Diamondback Energy Inc. (NASDAQ:FANG) was its merger with Endeavor Energy Resources, finalized on September 10, 2024. This merger not only expands the company’s asset base but also positions it as a stronger competitor in the North American oil market. Additionally, on November 3, 2024, Diamondback Energy Inc. (NASDAQ:FANG) entered into an agreement to trade certain Delaware Basin assets with TRP Energy, which is expected to improve the company’s cash flow and production profile. These developments make Diamondback Energy Inc. (NASDAQ:FANG) a compelling choice for investors looking for high-growth opportunities in the energy sector.
Overall FANG ranks 2nd on our list of the high-growth energy stocks to invest in. While we acknowledge the potential of FANG as an investment, our conviction lies in the belief that 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 FANG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
