We recently published a list of What Happened to LNG Stocks and 10 Best LNG Stocks to Buy Now. In this article, we are going to take a look at where TotalEnergies SE (NYSE:TTE) stands against the other LNG stocks.
Liquefied natural gas is one of the fastest-growing sectors in the energy industry. The global LNG market is changing quickly to meet the rising demand for gas in new markets. This growth is fueled by more companies getting involved and faster advancements in technology, but faces uncertainties due to supply constraints.
The 2024 World LNG Report reveals that the global LNG market now connects 20 exporting with 51 importing markets, with supply being the main constraint on growth. After two turbulent years, the market has reached a fragile equilibrium due to limited spare supply.
Geopolitical tensions have significantly shifted demand and supply dynamics, fueling price volatility and causing natural gas prices to rise across all key markets in the second quarter of 2024. These factors continue to pose challenges for the industry in 2024.
However as the industrial coal-to-gas transition gathers steam fueled by solid demand in China and Southeast Asia, demand for LNG is expected to grow by 40% by 2040.
The worldwide market for liquefied natural gas is expected to experience steady expansion until 2030 as production increases, resulting in reduced costs and a broader market reach in nations where coal is more affordable.
The total LNG supply globally is anticipated to rise by an average of 31 million metric tons annually until 2030. Production capacity is expected to grow by 30% or more from 2026 to 2028 due to the launch of new liquefaction facilities. LNG Capacity should exceed 600 million by 2030.
The increased supply comes as companies invest billions of dollars in building LNG facilities in the hope of cashing in on the exponential growth in demand. Amid the rise in LNG demand, investment opportunities are increasingly cropping up for investors looking to diversify their energy sector portfolios.
Over the last 50 years, LNG trade has grown at an average rate of 11% annually, starting from 2.6 million metric tons in 1971 and reaching 372.3 million metric tons in 2021. Given that the expansion has been consistently positive, it underscores the tremendous opportunity for grabs amid the transition from coal.
According to Julia Khandoshko, CEO of international broker Mind Money, the main trend in the LNG market is the transition to natural gas as LNG infrastructure expands, making it a preferred energy source.
The growing investments in the sector in the US and Europe affirm the sector’s long-term prospects. While US LNG exports have increased significantly since Russia invaded Ukraine, affecting key supply lines, there is still room for growth.
Japan dominates the $250 billion global LNG trade, giving it its primary role in the supply chain stage. Additionally, Japanese companies netted at least $14 billion in profit from gas-related business, affirming the booming business. Nevertheless, some of the best LNG stocks are in the U.S.
The shale oil and gas production surge has allowed the U.S. to secure the top spot in global natural gas output, contributing to stable prices at home. However, the country doesn’t require all this gas for its own use, making producers keen to sell it abroad to regions like Europe and Asia, where it fetches a premium. The U.S. Energy Information Administration anticipates a 2% increase in U.S. LNG exports this year and a further 18% rise next year as new export plants are established.
While energy stocks can be highly volatile, LNG stocks have proven more resilient than crude oil and other entry commodities. As natural gas moves to replace coal as the primary energy source amid the push to combat emissions, some of the best LNG stocks to buy now are poised to offer some of the best investment opportunities. Such stocks are of companies capable of delving low, modest LNG production growth at the lowest breakeven levels.
Companies investing billions into exploring more natural gas resources to meet the growing demand are some of the best investment plays in the sector. Additionally, companies are building LNG export and import infrastructure to benefit from the supply chain business.
Investments in building LNG infrastructure are expected to generate significant free cash flow going to the strong demand, consequently allowing the companies to pay big dividends.
Our Methodology
For our list of the best LNG stocks to buy now, we sifted through ETFs and online rankings to compile an initial list of 20 stocks. We then selected the 10 stocks that are the most popular among elite hedge funds. We have sorted the list in ascending order of the number of hedge funds that have 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 industrial oil and gas plant, with stacks of pipes issuing steam into the sky.
TotalEnergies SE (NYSE:TTE)
Number of Hedge Fund Holders: 18
TotalEnergies SE (NYSE:TTE), a conglomerate in the energy sector, is involved in producing and distributing oil, biofuels, and natural gas. The Integrated LNG division covers the entire natural gas supply chain, including the exploration and production of liquefied natural gas (LNG) and biogas, hydrogen, and gas trading activities.
Early in the year, the company signed a 16-year sale and purchase agreement to supply up to 0.8 million tons of LNG in Singapore starting in 2023. This contract highlights TotalEnergies SE (NYSE:TTE)’s dedication to backing Singapore’s energy safety and green initiatives while boosting its status as a leading international LNG supplier.
TotalEnergies SE (NYSE:TTE) is committed to becoming a company that does not release any carbon emissions into the atmosphere by the year 2050 and has already begun the necessary actions to reach this goal. It intends to increase its use of renewable energy sources. The company anticipates spending between $17 and $18 billion in the year 2024, with $5 billion allocated specifically to the Integrated Power sector.
The leadership team also focuses on growing the company’s LNG (Liquefied Natural Gas) business worldwide. In 2023, the company solidified its presence in Europe by launching two floating regasification terminals. Moreover, extending the agreements with Oman LNG for another 10 years and with Dalhart LNG for 5 years will enhance the company’s global LNG business.
The company delivered solid financial results for its fiscal 2023 amid an uncertain environment as adjusted net income rose to $23.2 billion and cash flow reached $35.9 billion. It also increased its dividend payments by 7.1% and completed 4$9 billion in buybacks.
TotalEnergies SE (NYSE:TTE) is one of the most financially stable LNG Companies, and it has a trailing 12-month cash flow from operations of $40.68 billion, which is notably greater than the sector’s average of $679.52 million. Likewise, its trailing 12-month cash flow per share is $11.59, which is notably greater than the sector’s average of $1.01.
Similarly, the company returns value to shareholders through dividends. It distributes a yearly dividend of $3.20 per share, equating to a dividend yield of 5.12% based on its current share value. Over the last four years, its average dividend yield has been 6.60%. Over the last five years, TotalEnergies SE (NYSE:TTE) ‘s dividend payments have increased at a 2% compound annual growth rate.
Insider Monkey reports that the number of hedge funds with stakes in the company remained steady at 18 in Q2 2024, unchanged from the previous quarter.
Here is what Aristotle Capital Management, LLC, an investment management company, said about TotalEnergies SE (NYSE:TTE) in its first quarter 2024 investor letter:
“During the quarter, we sold our positions in Phillips 66 and Sysco and invested in two new positions: Lowe’s Companies and TotalEnergies SE (NYSE:TTE).
Headquartered in Paris, France, TotalEnergies was founded in 1924 and is one of the world’s largest energy companies. The company operates in more than 130 countries and spans the entire energy value chain, producing and marketing oil and biofuels, liquid natural gas (LNG), renewables and electricity.
To meet the challenge of the energy transition and still ensure reliable energy in the short term, TotalEnergies has implemented a two-pillar strategy: on one end, the company continues to develop low-cost exploration and production projects, with LNG playing a vital role in the transition; on the other, it has been building its Integrated Power segment through investments in renewable power. As such, management plans to invest over 30% of total spending in low-carbon businesses and rank among the world’s top five providers of solar and wind energy by 2030. To emphasize this ambition, the company changed its name from Total to TotalEnergies in 2021…”
Overall TTE ranks 7th on our list of the best LNG stocks to buy. While we acknowledge the potential of TTE 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 timeframe. If you are looking for an AI stock that is more promising than TTE 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.