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Energy Market Remains Volatile: 3 Low-Beta Stocks to Watch
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Broad inflationary pressures are increasing. Investors now expect the Federal Reserve to keep raising rates aggressively, thereby increasing fears of recession and spurring market volatility. The energy sector is known for its volatile business scenario, and a slowdown in economic activities could significantly dent energy fuel demand.
Companies belonging to the sector have been witnessing a choppy business environment since the onset of the coronavirus pandemic. The initial 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 the scientists, which in turn led to the gradual opening of the economies, the pricing scenario of West Texas Intermediate (WTI) crude improved drastically over time to reach $123.64 per barrel on Mar 8, 2022. Oil price data is per the U.S. Energy Information Administration.
Considering the backdrop, it would be wise for investors to keep their eyes on low-beta energy stocks like Chesapeake Energy Corporation (CHK - Free Report) , Shell plc (SHEL - Free Report) and Repsol SA (REPYY - Free Report) .
Understanding of Beta
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.
If a stock has a beta of 1, then the price of the stock will move with the market. So, 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.
3 Energy Stocks to Gain
We have employed our Stock Screener to zero in on three stocks that are not as volatile as the broader market, reflecting that beta for all the stocks lies between 0 and 0.7. One of the stocks sports a Zacks Rank #1 (Strong Buy), while another two stocks carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
Chesapeake Energy Corporation: Chesapeake Energy is a premium natural gas operator and is well-positioned to gain from the significant improvement in gas prices in the past year. In the prolific gas-rich Marcellus shale play, CHK’s operation spreads across roughly 650,000 net acres, where an average of four to five rigs will be operating this year.
Chesapeake Energy also has a strong presence in Haynesville and Eagle Ford shale play, making the production outlook bright. Overall, being a leading upstream energy player, CHK has more than 15 years of inventory, signifying more than 2,200 gas locations. #1 Ranked CHK has a strong focus on returning capital to shareholders, as reflected in June 2022.
It has doubled its buyback program to up to $2 billion in an aggregate value of its common stock from the prior $1 billion. The program will possibly continue through year-end 2023. Stockholders are also getting rewarded through lucrative dividend payments, as reflected in the announcement of a base dividend increment of 10% to $2.20 per share annually.
Shell plc: Shell has a strong upstream portfolio across the world with key projects under construction that will start in 2022 through 2023, and some will probably begin operating beyond 2024. Shell is also leading energy transitions, as reflected in its ambitious plan of setting up a net zero-emissions energy business by 2050. Over the past seven days, the stock, with Zacks Rank of 3, has witnessed upward earnings estimate revisions for 2022 and 2023, respectively.
Repsol SA: Having a strong focus on allocating capital toward core and more profitable oil and gas resources, Repsol completed additional investments in Marcellus. This year, the company completed its divestments and exit from nations like Malaysia, Russia, Greece and Ecuador. Repsol is a leader in energy transition with a goal of becoming a net zero emissions company by 2050. For 2022, Zacks #3 Ranked firm is likely to see earnings growth of 119.8%.
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Energy Market Remains Volatile: 3 Low-Beta Stocks to Watch
Broad inflationary pressures are increasing. Investors now expect the Federal Reserve to keep raising rates aggressively, thereby increasing fears of recession and spurring market volatility. The energy sector is known for its volatile business scenario, and a slowdown in economic activities could significantly dent energy fuel demand.
Companies belonging to the sector have been witnessing a choppy business environment since the onset of the coronavirus pandemic. The initial 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 the scientists, which in turn led to the gradual opening of the economies, the pricing scenario of West Texas Intermediate (WTI) crude improved drastically over time to reach $123.64 per barrel on Mar 8, 2022. Oil price data is per the U.S. Energy Information Administration.
Considering the backdrop, it would be wise for investors to keep their eyes on low-beta energy stocks like Chesapeake Energy Corporation (CHK - Free Report) , Shell plc (SHEL - Free Report) and Repsol SA (REPYY - Free Report) .
Understanding of Beta
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.
If a stock has a beta of 1, then the price of the stock will move with the market. So, 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.
3 Energy Stocks to Gain
We have employed our Stock Screener to zero in on three stocks that are not as volatile as the broader market, reflecting that beta for all the stocks lies between 0 and 0.7. One of the stocks sports a Zacks Rank #1 (Strong Buy), while another two stocks carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
Chesapeake Energy Corporation: Chesapeake Energy is a premium natural gas operator and is well-positioned to gain from the significant improvement in gas prices in the past year. In the prolific gas-rich Marcellus shale play, CHK’s operation spreads across roughly 650,000 net acres, where an average of four to five rigs will be operating this year.
Chesapeake Energy also has a strong presence in Haynesville and Eagle Ford shale play, making the production outlook bright. Overall, being a leading upstream energy player, CHK has more than 15 years of inventory, signifying more than 2,200 gas locations. #1 Ranked CHK has a strong focus on returning capital to shareholders, as reflected in June 2022.
It has doubled its buyback program to up to $2 billion in an aggregate value of its common stock from the prior $1 billion. The program will possibly continue through year-end 2023. Stockholders are also getting rewarded through lucrative dividend payments, as reflected in the announcement of a base dividend increment of 10% to $2.20 per share annually.
Shell plc: Shell has a strong upstream portfolio across the world with key projects under construction that will start in 2022 through 2023, and some will probably begin operating beyond 2024. Shell is also leading energy transitions, as reflected in its ambitious plan of setting up a net zero-emissions energy business by 2050. Over the past seven days, the stock, with Zacks Rank of 3, has witnessed upward earnings estimate revisions for 2022 and 2023, respectively.
Repsol SA: Having a strong focus on allocating capital toward core and more profitable oil and gas resources, Repsol completed additional investments in Marcellus. This year, the company completed its divestments and exit from nations like Malaysia, Russia, Greece and Ecuador. Repsol is a leader in energy transition with a goal of becoming a net zero emissions company by 2050. For 2022, Zacks #3 Ranked firm is likely to see earnings growth of 119.8%.