In this article, we will look at the 10 Most Profitable Energy Stocks To Invest In.

Global Energy Demand Set to Soar

The International Energy Agency (IEA) projects a significant increase in global energy demand, with an annual growth rate of 3.4% projected until 2026. The majority of this demand, approximately 85%, is expected to come from China and India, with India’s energy demand alone forecasted to grow at an impressive 6% annually until 2026, driven by robust economic growth and rising household consumption. Southeast Asia is also expected to experience a substantial increase in electricity demand, with a 5% annual growth rate predicted until 2026.

In contrast, the United States is expected to see a more moderate increase in electricity demand, primarily driven by the growing need for data centers. The electricity usage by data centers, artificial intelligence, and cryptocurrency is expected to double to 1,000 TWh by 2026.

However, the IEA notes that the rise in electricity generation from low-emission sources will meet global demand growth over the next three years. Renewable energy is anticipated to surpass coal as the leading energy source by early 2025, marking a significant milestone in the global transition towards cleaner energy. This shift towards renewable energy is expected to play a crucial role in meeting the world’s growing energy needs while reducing greenhouse gas emissions and mitigating the impacts of climate change.

Energy Industry to Require Balanced Approach

In an interview on CNBC on September 18, ConocoPhillips CEO Ryan Lance said that he is optimistic about the future of the energy industry. Lance highlighted that the US is well-positioned to supply the growing demand for natural gas, particularly in Europe. He noted that the shale revolution in the US has been a “remarkable” game-changer for the industry and that the country is now a major player in the global energy market. Lance also pointed out that the US has a huge natural gas supply, which provides an opportunity to keep energy prices low and support growing power demand and electrification.

In addition, Lance discussed the need for a diverse energy mix to meet growing power demand in the US and globally. He noted that while renewable energy sources are growing, they are not yet sufficient to meet demand and that other forms of energy, including coal and nuclear, will still be needed. He cited the example of California, which plans to import more electricity from coal-powered plants in South Dakota and Wyoming, despite its efforts to reduce greenhouse gas emissions. This, Lance argued, highlights the complexity of the energy landscape and the need for a balanced approach.

Lance also touched on the potential impact of interest rate decisions by the Federal Reserve on the oil and gas industry. While acknowledging that a rate cut could have some impact, Lance emphasized that what matters most is a healthy economy in the US and globally.

The growth in global energy demand poses a significant challenge, it is essential to prioritize sustainable and low-emission energy sources to meet the growing demands. With that in context let’s take a look at the 10 most profitable energy stocks to invest in.

Our Methodology

For this article, we used Finviz and Yahoo Finance stock screeners plus online rankings to compile an initial list of the 80 largest companies in the energy sector by market cap. From that list, we narrowed our choices to 10 companies with positive TTM net income and 5-year net income growth from reputable sources including SeekingAlpha (which provided insights into 5-year growth rates) and Macrotrends (which supplied information on trailing twelve-month (TTM) net income). Then we sorted the stocks in ascending order, according to their hedge fund sentiment, which was taken from our database of 912 elite hedge funds as of Q2 of 2024.

Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

10 Most Profitable Energy Stocks To Invest In

10. Cenovus Energy (NYSE:CVE)  

TTM Net Income: $3.50 Billion  

5-Year Net Income CAGR: 74.34%  

Number of Hedge Fund Holders: 46  

Cenovus Energy (NYSE:CVE) is a prominent Canadian oil company that specializes in oil sand production and refining and owns diverse assets in Western Canada, the United States, and other international locations. The company’s operations encompass a range of conventional oil and gas fields, oil sands, and a refining segment comprising two refineries in the United States.

In the second quarter, Cenovus Energy (NYSE:CVE) delivered a notable production beat, producing 800,800 barrels of oil equivalent per day, exceeding consensus expectations. The company also upgraded its guidance for downstream performance for the year’s second half, further enhancing its positive outlook. Additionally, the company has a strong track record, with its net income increasing by a CAGR of 74.34% over the last 5 years.

Cenovus Energy’s (NYSE:CVE) net income for the twelve months ending June 30 was $3.50 billion, a 22.51% increase year-over-year. The company has successfully achieved its net debt target of $4.0 billion and is now shifting its focus towards returning value to shareholders. As part of this strategy, the company will allocate 100% of its excess free cash flow towards share repurchases, which will not only reduce its share count but also increase earnings per share. This move is expected to create long-term value for investors and demonstrate the company’s commitment to delivering returns.

Cenovus Energy (NYSE:CVE) presents a compelling investment opportunity for those seeking a high-quality energy company with strong growth prospects. As of the second quarter, its stock was held by 46 hedge funds with stakes worth $1.21 billion.

9. Marathon Petroleum (NYSE:MPC)  

TTM Net Income: $7.18 Billion  

5-Year Net Income CAGR: 20.85%  

Number of Hedge Fund Holders: 50  

Marathon Petroleum (NYSE:MPC) is one of the largest petroleum refining and marketing companies in the United States and provides transportation fuels, lubricants, and petrochemicals. The company operates a vast network of refineries and pipelines and has a significant presence in midstream logistics.

Marathon Petroleum’s (NYSE:MPC) cash flow has been robust, with $2.7 billion in cash flow from operations (CFFO) and modest capital expenditures, resulting in free cash flow (FCF) of $2.2 billion. This has enabled the company to maintain a nearly 15% dividend yield and aggressively repurchase shares. Since mid-2021, Marathon Petroleum (NYSE:MPC) has reduced its outstanding share count by almost 50% and is expected to continue this trend. The company’s outlook is positive,

Marathon Petroleum (NYSE:MPC) owns 64% of MPLX (NYSE:MPLX), which provides a strong foundation for its business. In Q2, Marathon Petroleum (NYSE:MPC) received a $550 million quarterly distribution from the company. Marathon Petroleum (NYSE:MPC) has generated strong EBITDA with quarter-over-quarter growth. The company’s net income for the twelve months ending June 30 was $7.18 billion, representing a 20.85% CAGR over the past 5 years.

Marathon Petroleum (NYSE:MPC) expects roughly 2.6 million barrels per day in throughput, with $5.35 per barrel in operating cost. The company’s distribution costs come out to $6.5 per barrel, and spreads remain relatively strong, supporting continued returns.

Marathon Petroleum’s (NYSE:MPC) dividend yield of nearly 15% and aggressive share repurchases make it an attractive investment opportunity for those looking to benefit from the energy sector. As of the second quarter, 50 hedge funds have invested a total of $2.21 billion in Marathon Petroleum’s (NYSE:MPC) stocks. Elliott Management holds stocks worth $1.27 billion and is the largest shareholder in the company, according to Insider Monkey’s database.