Best Energy Stocks for July 2024

Energy sector stocks—including those exploring for and developing oil and gas products, as well as renewable energy sources and some consolidated utility firms—represent a massive market with strong growth potential. But it's worth noting that a long-term shift away from fossil fuels means that some stalwarts of the sector have had to pivot.

Below are some of the best energy stocks for July 2024 based on 30-day returns. See further below for a detailed explanation of our methodology for ranking energy stocks. All data are current as of June 20, 2024.

What to Know About the Energy Sector

Energy stocks as a group saw negative returns in 2023, then rose early in 2024 along with the price of oil before dropping in the last two months. Broadly speaking, energy stock prices tend to follow changes in energy prices; when energy prices peaked in 2022 due to Russia's invasion of Ukraine and the ongoing impact of the COVID-19 pandemic, for example, many energy sector companies saw gains.

Also key to the energy sector's performance is production levels globally. U.S. oil production has been fairly high in recent months, but many OPEC+ countries have capped production. Demand for energy products is continuing to grow, but there is a question as to whether supply will increase accordingly.

How We Chose the Best Energy Stocks

We identified the top energy stocks for July 2024 by conducting a screen of all stocks in the sector. We begin by selecting a subset of energy sector stocks that trade on the New York Stock Exchange or the Nasdaq and which meet each of the following criteria:

• Share price is $5 or higher
• Daily trading volume is 100,000 or higher
• Market capitalization is $300 million or higher

From that subgroup, we ranked energy stocks by 30-day return and selected the top-performing stocks based on that metric. Note that two of our top-ranked stocks, Tellurian Inc. and Sable Offshore Corp., do not have P/E ratios, as they both posted net losses in the relevant time period. Note also that the stocks we evaluated are those of energy companies; this screen did not include products utilized in energy trading directly.

Energy Stock Advantages and Disadvantages

One of the key advantages of energy stocks is that the energy market is enormous, the result of the fact that the world relies on the energy sector to power cars, factories, machinery, and much more. The global energy market has a value of roughly $6 trillion. This means that companies can participate in the energy market in a variety of ways, and subindustries include energy storage, production, transportation, and distribution, among others. Investors can find many opportunities to specialize or focus their investments throughout these subindustries.

Not only is the energy industry massive, but it also has significant potential for growth. The United Nations expects that the world will need to invest $2.4 trillion per year over the next 11 years in energy systems in order to achieve the goals of the Paris Climate Agreement. As the world transitions to renewable energy sources, investors will have a wider variety of opportunities to invest in companies unrelated to traditional fossil fuels.

On the other hand, there are also several important disadvantages of the energy sector. As described above, energy stocks are heavily dependent upon the price of energy, which is tied to a complex web of geopolitical factors and variables. This makes the energy sector highly volatile at times.

Investors focused on ESG goals may find it difficult to target energy companies for investment while maintaining these principles. Fossil fuels in particular are a major contributor to climate change; as climate change continues to develop, new challenges to the ways that we produce, store, and distribute energy are likely to emerge.

Energy stocks have the potential to be lucrative, but they also carry risks including bankruptcy and volatility. And while the stocks above are at the top of our screen for this month, past performance is not a guarantee of future returns.

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As of the date this article was written, the author does not own any of the securities listed above.