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 paramount since the securities will deliver healthy returns and shield against choppy market conditions.
In this regard, stocks like
Kinder Morgan, Inc. ( KMI Quick Quote KMI - Free Report) , Murphy USA Inc. ( MUSA Quick Quote MUSA - Free Report) and Granite Ridge Resources, Inc. ( GRNT Quick Quote GRNT - Free Report) 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 are per the U.S. Energy Information Administration. Oil is currently trading higher than the $85-per-barrel mark, and the Israel-Palestine conflict is fueling the energy market uncertainty.
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 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 companies either carry a Zacks Rank #1 (Strong Buy) or #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 stocks here. Kinder Morgan generates stable and handsome fee-based revenues as it is the leading midstream service provider in North America. Its extensive pipeline network spans 82,000 miles and is used for transporting a variety of products, including natural gas, refined petroleum products, crude oil and more. Over the past seven days, the Zacks #2 Ranked stock has witnessed upward earnings estimate revisions for 2023. 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 seven days, the #2 Ranked stock has witnessed upward earnings estimate revisions for this year.
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, with a Zacks Rank of 1, also has a strong portfolio of wells. Apart from the Permian, GRNT has exposure to another four key unconventional basins in the United States.