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 Woodside Energy (NYSE:WDS) 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).

Woodside Energy (NYSE:WDS)

Number of Hedge Fund Holders: 12

Woodside Energy (NYSE:WDS) is an energy company that explores, evaluates, and develops hydrocarbons. It produces liquefied natural gas, pipeline gas, and crude oil. It is one of the companies that has benefited from elevated gas prices over the past three years and has seen its free cash flow grow, therefore rewarding investors with dividends.

Woodside Energy (NYSE:WDS) has been strengthening its LNG footprint by acquiring OCI’s clean ammonia project and Tellurian. The acquisition aligns with the market shift towards greener fuel options and is expected to boost its position in the LNG sector. The company has also secured long-term LNG supply agreements with Korea Gas Corporation and CPC Corporation in Taiwan, emphasizing the critical role of LNG in ensuring regional energy security.

The leading natural gas producer delivered solid first half of the year’s results, which were characterized by $1.9 billion in net profit after tax as unit production costs dropped 6% and free cash flow rose to $740 million. The solid results were fuelled by strong demand for LNG and its role in the energy transition from coal.

Woodside Energy (NYSE:WDS) has shown strong financial and operational results in the first six months of 2024. The firm continues to concentrate on executing its plan, controlling expenses efficiently, and seeking expansion chances while upholding its dedication to environmental responsibility and providing returns to its investors.

Woodside Energy (NYSE:WDS) distributes substantial dividends to its investors, currently boasting a dividend yield of 7.15%. The company also has a history of consistently paying dividends for an impressive 33 years.

While the stock trades at a price-to-earnings multiple of 18, its shares are priced in an attractive way for value investors eyeing exposure in the LNG sector. Moreover, the stock usually shows minimal fluctuations in price, making it attractive to investors looking for a stable investment option in their portfolio.

In the second quarter, Woodside Energy (NYSE:WDS) stock was held by 12 hedge funds with stakes worth $99.19 million.

Overall WDS ranks 9th on our list of the best LNG stocks to buy. While we acknowledge the potential of WDS 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 WDS 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.