In this video, our editor Richard Hemming and Resources Analyst Peter Chilton discuss the energy stocks you need to charge up your ASX Share Portfolio. Watch the video to discover the stocks.
What's happening in the energy sector?
Energy has been a topic of conversation because there has been some big increases in energy prices including oil, gas and LNG. However, this hasn't been reflected in the share price of the stocks in the sector.
Should energy stocks be part of an investors ASX share portfolio?
Energy stocks should definitely be part of investors ASX Share Portfolio. There are many opportunities to invest in oil, gas and renewables. There is quite a difference between the players in the sector and its importance to have independent, quality research so you can be at the forefront when these opportunities arise.
Why is there such strength in the LNG and oil price?
As a result of COVID there have been delays in projects which means there will be tightness in the oil price. We have already seen the oil price rise from $50 to $60 or more. We expect the oil price to go higher. LNG prices are often linked to the oil and gas prices, which have been tighten due to a of lack of supply.
Are there buying opportunities in Small Cap energy stocks?
Cooper Energy (COE) has been an Under the Radar Report special and is linked to domestic gas prices. COE have had a few production problems, but they are being ironed out. It’s only a matter of time before they are operating at their proper production levels. They also have enormous production growth and profit growth. Within the next six months we will begin to see that.
Another Small Cap energy stock is Karoon Energy (KAR), a project in Brazil that was recently acquired and that will be doubling in production within the next 12 months. KAR has good exposure to the oil price so it’s a good way of getting exposure to oil versus the bigger players.
At the big end of town, are there energy stock buying opportunities?
Santos (STO) is always worth looking at, as it has good growth and exploration so for oil exposure that’s one to take into account. Another one is Woodside Petroleum (WPL), which has exposure to oil through LNG which is a link. WPL have development projects so it’s one to keep a watch on.
Is there more risk because of the transition between tradition coal power energy to more renewable energy?
When you look at Origin Energy (ORG) and AGL Energy (AGL) both ASX stocks are in a state of flux with renewables coming through whether that be through wind, solar plus weakened demand because of COVID. There are a lot of things happening which has led to a drop-in retail prices of both electricity and gas which impacts them hugely. Both these stocks have been sold down and there might be an opportunity, but it may not be quite yet. Again, investors need to source independent research to ensure they are up to date when buying opportunities emerge.
Is now the time to buy lithium?
It’s hard to go past the battery phenome represented by the rising demand for lithium. Investors may have misseed easy money in the beginning but if you look at the US, all the stocks linked with electric vehicles (which is not just raw materials like lithium) they are all going gang busters. Its definitely a sea change and a global trend and there are some good opportunities in Australia like Pilbara Minerals (PLS).
Would you prefer PLS over Orocobre (ORE), or Galaxy Resources (GXY)?
These stocks are the three that have emerged from a lot of trouble in the industry. Ideally you would invest in two or three for diversification. They are different. PLS is hard rock mining where as GXY and ORE are more focused on brime minery and recovery in south America. They exist in a different market with different attributes but both worth mentioning.
If you were to invest in one would you prefer PLS?
The good thing about PLS is it’s in production now, can ramp up to full production very quickly or accordingly to demand and has good long term contracts. Whereas ORE is in production and has to develope its second stage. There are different things to consider.
What's the future of renewable energy?
We are seeing more activity for example Genex Power (GNX) getting a portfolio of solar, wind and battery. So, we are seeing some smaller operators in the field. This may be an area we see in future. There is going to be a lot more tension being played at these alternative sources of energy including Hydrogen as well with a disruptive affect. The other thing is Worley (WOR) is doing a lot of maintenance and consulting for these renewable energy companies and it has a big position maintaining the offshore wind farms in Europe. There are a lot of opportunities in energy and there is something for everyone. There are Small Caps for growth options and big companies and they are going to take advantage of big prices.
Invest in Small Caps confidently and sign up for your 14-day free trial now.