Combat Volatility With These 3 Low-Beta Energy Stocks
Oil prices have witnessed wild swings since the onset of the coronavirus pandemic, reflecting that notorious volatility is an integral part of the energy sector. 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 Evolution Petroleum Corporation EPM, Profire Energy, Inc. PFIE and Granite Ridge Resources, Inc. GRNT 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 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 were provided by the U.S. Energy Information Administration. Oil is currently trading higher than the $80-per-barrel mark.
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, its price 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. The three companies currently carry a Zacks Rank #2 (Buy), and all 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.
Evolution Petroleum is a well-known name in the upstream space, with investments in onshore oil and natural gas properties in the United States. The company’s production outlook seems bright since it has a long life and low decline asset bases with low-risk development inventories. Thanks to the low-risk assets and conservative acquisitions, EPM has the capability of returning capital back to shareholders through growing dividends.
Profire Energy is a leading provider of powerful and safe burner and combustion management solutions. PFIE’s business is mainly focused on the energy sector’s upstream, midstream and downstream areas. Profire Energy is highly focused on expanding its product solutions in oil and gas operations that have new opportunities.
As a non-operated oil and gas exploration and production company,Granite Ridge has top-tier acreage across the Permian — the most prolific basin in the United States.Granite Ridge also has a strong portfolio of wells. Apart from the Permian, GRNT has exposure to another four key unconventional basins in the United States.
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Evolution Petroleum Corporation, Inc. (EPM) : Free Stock Analysis Report
Profire Energy, Inc. (PFIE) : Free Stock Analysis Report
Granite Ridge Resources, Inc. (GRNT) : Free Stock Analysis Report
