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 Cenovus Energy Inc. (NYSE:CVE) 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).
A fleet of oil tankers at sea, representing the global reach of a crude oil supplier.
Cenovus Energy Inc. (NYSE:CVE)
Number of Hedge Fund Holders: 46
Forward P/E Ratio as of September 29: 8.94
Cenovus Energy Inc. (NYSE:CVE) is an integrated energy company based in Calgary, Canada, engaged in developing, producing, refining, and marketing crude oil, natural gas, and refined products in Canada and globally. The company operates across several segments, including Oil Sands, Conventional, Offshore, Canadian Refining, and U.S. Refining, making it a diversified player in the energy sector. Cenovus Energy Inc. (NYSE:CVE) has a forward P/E ratio of 8.94, making it an attractive inclusion among cheap energy stocks trading under $20. The company’s low valuation, coupled with solid fundamentals, positions it as a compelling investment option for value-focused investors looking for exposure to the energy sector.
Cenovus Energy Inc. (NYSE:CVE) reported strong second-quarter 2024 results, driven by its efficient operational performance and disciplined financial management. The company achieved its net debt target of $4 billion in July, which is a significant milestone, allowing it to shift its focus towards returning excess free funds flow to shareholders. During Q2 2024, Cenovus Energy Inc. (NYSE:CVE) generated an operating margin of $2.9 billion and free funds flow of $1.2 billion, supported by robust benchmark crude oil prices and a narrowing light-heavy differential. The company’s oil sands segment, which produced approximately 610,000 barrels per day, saw an operating margin increase of $500 million compared to the prior quarter, reflecting its ability to optimize production and reduce costs.
The company’s commitment to enhancing shareholder value was further highlighted by its efforts in reducing operational costs and improving efficiency across its segments. Production in the conventional segment rose by 2,400 BOE per day, while offshore production increased by 1,300 BOE per day from the previous quarter, demonstrating steady growth. Cenovus Energy Inc. (NYSE:CVE) also remains on track with its oil sands growth projects, including the Narrows Lake tie-back to Christina Lake and the Foster Creek Optimization Project, both of which are expected to drive future growth.
Moreover, hedge fund interest in Cenovus Energy Inc. (NYSE:CVE) increased in Q2 2024, with 46 funds holding positions, up from 44 in the previous quarter. This growing institutional interest signifies confidence in the company’s financial health and strategic direction, making Cenovus Energy a strong contender in the list of cheap energy stocks to buy now.
Overall CVE ranks 2nd on our list of cheap energy stocks to buy under $20. While we acknowledge the potential of CVE 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 CVE 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.