We recently published a list of 7 Cheap Energy Stocks To Buy Under $20. In this article, we are going to take a look at where NOV Inc. (NYSE:NOV) stands against the other cheap energy stocks to buy under $20.
The energy sector is undergoing a major transformation in 2024, driven by a combination of evolving market dynamics, fluctuating commodity prices, and the increasing role of renewable energy sources. As investors navigate this changing environment, they are met with both opportunities and challenges. While oil prices show signs of stability, renewable energy adoption continues to gain momentum, creating a unique landscape for energy stocks.
Brent crude oil prices are expected to stabilize around $82 per barrel, reflecting a slight uptick from $81 in 2023. This stabilization signals a return to pre-pandemic levels, a trend supported by strategic production cuts from OPEC+. Market analysts predict that these cuts will help maintain the delicate balance between supply and demand, which is pivotal in shaping the oil markets in 2024. Meanwhile, the average retail gasoline prices are forecasted to remain steady at $3.30 per gallon over the next two years. This stability, combined with the growth in U.S. crude oil production—from 12.9 million barrels per day in 2023 to an anticipated 13.3 million barrels per day in 2024—reflects a strong domestic supply environment.
In addition to crude oil, the U.S. liquefied natural gas (LNG) sector is expected to witness robust growth. Gross LNG exports are projected to increase from 12 billion cubic feet per day in 2023 to 14 billion in 2025, highlighting the U.S.’s evolving role as a significant player in the global energy markets. The rise in LNG exports is likely to boost the country’s influence in international energy trade, positioning it as a key energy exporter in the coming years.
Natural gas prices at Henry Hub are also poised for changes. While prices are expected to stay relatively stable at $2.20 per million British thermal units (MMBtu) in the near term, they are projected to surge to around $3.10/MMBtu in 2025. This increase reflects the interplay between the rising production capabilities and the growing export demands of the U.S. energy sector. Notably, the shift toward biomass-based diesel products, which now account for 9% of total distillate fuel consumption, underscores the sector’s movement toward more sustainable fuel options amid growing environmental concerns.
The electricity generation landscape in the U.S. is also seeing significant shifts. While natural gas remains the primary source, contributing 42% of total electricity generation, the share of renewables is increasing rapidly—from 21% in 2023 to an expected 25% by 2025. Solar energy, in particular, is leading this charge. The first half of 2024 saw solar energy account for 59% of new generating capacity additions, driven largely by advancements in battery storage technologies. States like Texas and California are expected to be at the forefront of solar generation, reflecting the broader trend of transitioning to green energy.
These shifts in the energy landscape are supported by a steady economic environment. The U.S. GDP is projected to grow by 2.6% in 2024, providing a solid backdrop for energy market developments. However, CO2 emissions are forecasted to remain steady at 4.8 billion metric tons, emphasizing the ongoing challenges of balancing energy production with environmental sustainability. As climate change becomes a more pressing issue, energy companies are under increasing pressure to innovate and adopt more sustainable practices.
Geopolitical tensions, such as the political instability in Libya, add another layer of complexity to the energy markets. These events can lead to unexpected production outages, influencing global oil supply and prices. Despite these uncertainties, the energy sector’s fundamentals appear strong, offering promising opportunities for discerning investors. The combination of ongoing production cuts by OPEC+ and strong demand from non-OECD countries is expected to drive an increase in oil consumption, enhancing the appeal of energy stocks in 2024.
Given this backdrop, identifying the best energy stocks under $20 becomes crucial for investors looking to capitalize on the anticipated shifts in the sector. The companies featured in this analysis are well-positioned to benefit from the evolving energy landscape.
Our Methodology
For this article, we utilized the Finviz stock screener to identify stocks within the energy sector that have forward price-to-earnings (P/E) ratios below 15 as of September 29. From this initial list, we focused on seven stocks that are most favored by institutional investors. These stocks were then ranked in ascending order of the number of hedge funds holding stakes in them, as of Q2 2024.
At Insider Monkey we are obsessed with 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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
An engineer inspecting a complete set of oil and gas components.
NOV Inc. (NYSE:NOV)
Number of Hedge Fund Holders: 29
Forward P/E Ratio as of September 29: 6
NOV Inc. (NYSE:NOV) is a prominent global provider of equipment and technologies for the oil and gas, industrial, and renewable energy sectors. Given its strategic role in developing resilient infrastructure and its robust portfolio of drilling equipment, production technologies, and hydraulic fracture tools, NOV Inc. (NYSE:NOV) should be considered a strong candidate for inclusion among cheap energy stocks to buy. With a forward P/E ratio of 6, the stock is attractively valued, making it an appealing option for investors looking to capitalize on the company’s continued growth and stability in a volatile market.
For the second quarter of 2024, NOV Inc. (NYSE:NOV) demonstrated strong financial performance, underscoring its operational strength and focus on high-margin markets. The company reported revenues of $2.22 billion, representing a 6% year-over-year increase, and a net income of $226 million, translating to earnings of $0.57 per diluted share. This marked a substantial improvement of $0.18 per share compared to the same period last year. Furthermore, EBITDA surged by 15% to $281 million, with EBITDA margins expanding to 12.7%, driven by cost-saving initiatives and a favorable revenue mix.
NOV Inc. (NYSE:NOV) success is bolstered by its strategic shift towards high-margin international and offshore markets. During the quarter, the company saw a significant rise in bookings for flexible pipe solutions, particularly for deepwater FPSO developments and well intervention equipment in offshore regions. The book-to-bill ratio was nearly 180%, reflecting the strong demand for NOV Inc. (NYSE:NOV) products and services in these high-growth markets. Additionally, the company’s cost-saving measures have resulted in approximately $75 million in annualized savings, further strengthening its profitability amid a challenging North American market environment.
NOV Inc. (NYSE:NOV) has also adopted advanced artificial intelligence solutions to optimize manufacturing processes, enhance capacity utilization, and reduce production costs. This technological integration has not only improved the company’s operational efficiency but also solidified its competitive advantage within the energy equipment sector.
As of Q2 2024, 29 hedge funds hold positions in NOV Inc. (NYSE:NOV), down slightly from 33 in the previous quarter. Despite this modest decline in institutional interest, the stock remains fundamentally strong, supported by stable cash flows, expanding EBITDA margins, and solid international growth prospects. Given these factors, NOV Inc. (NYSE:NOV) offers a compelling investment opportunity for those seeking exposure to energy stocks.
Overall NOV ranks 7th on our list of cheap energy stocks to buy under $20. While we acknowledge the potential of NOV as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NOV 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.