What are Energy Stocks?

From solar to wind to fracking and mining, energy stocks include a wide range of technologies and companies.

If you look through our archives, you’ll see that energy stocks are in the headlines quite a bit. You’ll also see that the analysis is seemingly all over the place. You can find commentary like this: “By far the worst-performing sector in recent years has been the energy sector.” And you can also read this: “In the United States, we are in the middle of a massive energy boom. It is a global economic phenomenon of staggering proportions, and if you’re an investor of energy stocks, or want to be, you have a lot to gain.”

Do we really disagree that much? It’s enough to make your investing head spin. But let’s step back. 

Energy stocks are shares in companies that sell, distribute, or manufacture technology used to produce energy, whether it’s fracking, or windmills. Some companies may be levered to the price of oil and gas, while others are not exposed to commodity prices, but instead, collect a fee for the transport and storage of oil and gas.

Due to these differences, investing in the energy sector is not one size fits all. The good news about investing in energy stocks is that they aren’t widely owned, and therefore even the best ones are exceedingly undervalued. 

Be aware, however, that selectivity is critical in choosing these stocks. Some are no more than value traps, in which the stocks appear inexpensive but where decaying fundamentals will eventually threaten the company’s future. Energy sector stocks are heavily exposed to this risk. 

To find out more and discover how you can find the right stocks for your portfolio, download our free report, How to Find Undervalued Stocks – Plus the Benjamin Graham Approach to Value Stocks, right now.