Bet on These 3 Low-Beta Energy Stocks to Combat Volatility
Notorious volatility is an integral part of the energy sector, as evidenced by wild swings in oil prices since the onset of the coronavirus pandemic. Hence, creating a portfolio of low-beta energy stocks is of utmost importance since the securities will deliver healthy returns and shield against choppy market conditions.
In this regard, stocks like Murphy USA Inc. MUSA, Weatherford International plc WFRD and Transportadora de Gas del Sur SA TGS are worth betting on.
Extremely Volatile Energy Market
We should not forget how oil prices have behaved since the initial coronavirus outbreak. The early pandemic period, when there were no vaccines, saw an environment of heightened uncertainties. The commodity’s price plunged to a negative $36.98 per barrel on Apr 20, 2020.
However, with the rapid developments of vaccines by scientists, which, in turn, led to the gradual reopening of the economies, the pricing scenario of West Texas Intermediate crude improved drastically over time to reach $123.64 per barrel on Mar 8, 2022. Oil price data are per the U.S. Energy Information Administration.
Currently, oil is trading higher than the $70-per-barrel mark. The crude market scenario is still highly uncertain amid worries engulfing softer fuel demand growth next year amid excess supply.
Low-Beta Energy Stocks to the Rescue
While the energy market is highly volatile, it will be better to consider stocks belonging to the sector that are less volatile than the market. For analyzing a stock’s risk profile, it is better to employ a statistical measure called beta — one of the popular indicators. Beta measures the volatility or risk of a particular asset compared to the market. In other words, beta measures the extent of a security’s price movement relative to the market. In this article, we are considering the S&P 500 as the market.
If a stock has a beta of 1, then the price of the stock will move with the market. Therefore, the stock is more volatile than the market if its beta is more than 1. In the same way, the stock is not as volatile as the market if its beta is less than 1.
For example, if the market offers a return of 20%, a stock with a beta of 3 will return 60%, which is overwhelming. Similarly, when the market slips 20%, the stock will sink 60%, which is devastating.
While employing our proprietary stock screener, we have zeroed in on three low-beta energy stocks that investors should bet on. All the companies carry a Zacks Rank #2 (Buy) and have a beta lower than 1, which is our prime criterion for screening stocks.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Murphy USA is a renowned retailer of gasoline and convenience goods, distinguished by its adaptable business model that effectively enhances profitability during periods of economic expansion and recession. Over the past 30 days, the stock has witnessed upward earnings estimate revisions for this year.
Weatherford is a key energy player and is engaged in offering exclusive drilling technologies that will maximize clients’ reservoir exposure. Weatherford is also involved in well construction and completion activities in an efficient manner.
Transportadora’s midstream asset portfolio has the most extensive natural gas pipeline network in Latin America. It generates stable fee-based revenues since its pipeline assets transport more than 60% of the gas consumed in Argentina.
Year to date, the stock gained 18.3%, outpacing the industry’s 8.6% increase. The outperformance is backed by the company’s stable business model and a strong focus on creating differential value for shareholders. Also, TGS has significantly lower debt exposure than the composite stocks belonging to the industry.
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Murphy USA Inc. (MUSA) : Free Stock Analysis Report
Transportadora De Gas Sa Ord B (TGS) : Free Stock Analysis Report
Weatherford International PLC (WFRD) : Free Stock Analysis Report
