Energy is something we can't do without. It's been that way since homo sapiens were living in caves. Wood-burning fires helped protect people from dangerous carnivores, kept caves warm and provided light at night. In short, it was basic.

But in much of this century, many of us have taken the availability of affordable energy for granted. We expect that when we turn on the heat at home, it will work. Since the energy shocks of the 1970s, we've expected the cost won't break the bank. Likewise, getting gasoline from the filling station is easy and has been readily available at a reasonable price.

That's changed since the U.S. and Israel attacked Iran. It's brought energy-related matters to the forefront. Across the world, electricity, gasoline, diesel fuel, crude oil, fertilizer and natural gas have all seen sharp price rises. It's not always obvious to most people why that's happened.

We asked some experts why and what's happening, and at the same time, dug out some credible data that could tell us what's coming down the pike.

1. Extracting crude oil, refining and distributing are complicated.

Oil companies usually start by locating an oil deposit, then extract it from the ground or from undersea reserves. Next, the oil needs to be refined, so it's often shipped on massive vessels known as VLCCs (very large crude carriers).

When it gets to a refinery, the oil is converted into a variety of distillates, typically gasoline, diesel fuel, heating oil, and others. After refining is complete, the distillates are trucked to distributors, such as filling stations, across the U.S. If any part of the process is interrupted, prices can change.

The size of the price change will depend on the magnitude of the disruption.

2. Middle East at war in an energy zone.

On February 28, the U.S. and Israel attacked Iran. With 89 million people, Iran is the second largest country (behind Egypt) in the Middle East, where 30% of the world's oil is pumped.

But what happens in the Middle East doesn't stay in the Middle East. If there's a worry about access to oil, no matter where it's happening, traders in New York, London and Chicago quickly bid up the price.

"U.S. oil prices are sensitive to global prices," says Rob Haworth, senior investment strategist at U.S. Bank.

3. What matters about the Strait of Hormuz?

The Strait of Hormuz is a narrow waterway connecting the Persian Gulf to the Indian Ocean. At its narrowest point, the navigation lane is a vulnerable and easily mined two miles wide — half the range of a World War II-era torpedo.

As of this writing, the strait is shut down, choking off as much as 25% of the world's oil. It's not just the belligerents who have shut down shipments. Insurance companies have driven up the cost of insuring vessels while shipping companies want to stay out of harm's way.

"We are hearing shipping crews are reluctant to take on this role due to the risk of life," Haworth says.

4. Who's the king of crude oil output?

The U.S. is No. 1 in oil production — 13.7 million barrels per day in mid-March. Although the U.S. is the king of the oil patch, it doesn't control the price of its own oil.

Remember those traders in New York, London and Chicago? They've driven up the price of a barrel of crude oil to more than $100, vs about $65 before the war. According to AAA, the national average for a gallon of regular gas was $3.96 the last week of March, up more than a buck since before the war started.

To put it another way, the attack on Iran and the subsequent closing of the strait drove up the price of filling your car 35%. It now costs about $360 more to fill the tanks of a long-haul semi-truck than it did in February.

5. Don't expect quick drops in gasoline prices.

History shows that oil prices jump up quickly even on the potential of an oil blockade or a possible disruption.

In 2022, Russia invaded Ukraine, and the price of benchmark West Texas Intermediate crude shot up from $78 a barrel at the beginning of the year to $116 by May 30. It took until December 15 to fall to $57. The slow drop was due to production cuts by OPEC (Organization of the Petroleum Exporting Countries) plus Russia, says Rob Thummel, a senior portfolio manager at Infrastructure Capital Advisors.

"The supply was restricted," he says. Goldman Sachs warned in late March that the price of oil, and therefore, gasoline, could remain elevated until 2027.

6. The war has delivered profits to energy investors.

Since January, the energy sector has delivered exceptional returns. The State Street Energy Select Sector SPDR exchange-traded fund, which tracks a basket of energy stocks, had gained 34% excluding dividends by late March.

In contrast, the S&P 500 index lost 3.9% over the same period. It also helped that energy companies are better run than ever. "They generated free cash flow and paid down debt," Thummel says.

7. Energy is vital for food.

When you buy a loaf of bread, the cost includes energy.

Farmers typically use diesel-powered tractors to plant and harvest the wheat, plus fertilizer, which is often derived from natural gas. That must be milled into flour (using energy), made into bread in an oven (which uses energy), and taken to the store (likely via a diesel-powered truck).

"The cost of food will rise," says Jay Hatfield, CEO of Infrastructure Capital. "There is a huge bleed-through because food is 50% energy. Unless we open up the Strait, food prices will skyrocket."

8. Expect an inflationary surge.

When the price of energy increases, it tends to have an impact on costs across the board. The elevated prices of crude oil, gasoline, heating oil and natural gas will trickle through the global economy, raising prices of almost everything.

"The reality for this economy is that there's nowhere in the economy that fossil fuels don't touch," Haworth says.

9. Another energy risk: Artificial intelligence.

As anyone who has paid an electric bill lately knows, AI data centers demand enormous amounts of electricity and strain the power grid. In the U.S., about 45% of electricity is generated with natural gas and petroleum products. AI demands on energy are expected to double by 2030.

"The U.S. will need a lot of electricity to benefit data centers," Hatfield says.

10. All of the above.

The latest Middle East war has brought energy awareness back to the forefront. But the constraints on oil distribution and the rapidly rising demands for more electricity suggest a long-term adjustment in both the U.S.'s and the rest of the world's energy infrastructure.

It looks like we will need more oil, more coal, more hydro, more wind, more solar, more nuclear, more of everything to power the 21st century.

As Rob Thummel puts it: "The need for electricity is the new oil."

Note: This item first appeared in Kiplinger Retirement Report, our popular monthly periodical that covers key concerns of affluent older Americans who are retired or preparing for retirement. Subscribe for retirement advice that's right on the money.

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Love — and energy — make the world go 'round. But investors have shown a cold, cold heart to the energy sector, particularly conventional oil and gas producers. They've suffered from a widespread belief that fossil-fuel energy is in long-term decline.

The near-term economic forecast hasn't helped the stocks, either. Many skeptics feel global growth in 2026 won't be enough to push the price of oil much above current levels of about $60 per barrel for West Texas Intermediate crude, which is down from highs near $80 in January 2025. And even if demand picks up, producers are standing ready to supply more oil and send the price back down.

That has made energy stocks especially cheap in a market gone gangbusters on enthusiasm for artificial intelligence (AI). "The energy sector has become very neglected by mutual funds," says Jill Carey Hall, the head of strategy for U.S. small- and mid-cap stocks at investment firm BofA Securities. "Certainly from a valuation perspective, it looks attractive" compared with its history, she says.

The sector's bargain price tag — along with a desire to diversify portfolios overly concentrated in pricey AI-related fare — has now reached the point that investment strategists are increasingly bringing energy stocks into their warm embrace. And that suggests the stocks should probably make up a bigger share of your holdings.

Better days ahead for unloved energy stocks

"I think people are really missing the mark on how oil markets are improving in the medium term," says Tyler Rosenlicht, who supervises three energy-focused investment strategies at fund firm Cohen & Steers. He believes rising demand from energy-hungry industries will exceed oil supply as early as 2027, pushing prices higher. "The reality is, the world is short on energy," he says.

Cole Smead, the CEO of Smead Capital, says he can't see oil prices falling further, as some bears have forecast. "The world loves oil at these prices." Adjusted for inflation, $60-a-barrel oil "is obscenely cheap," says Smead.

That implies energy investors may find a floor at current levels, with the future looking up — even if some patience is required.

In the meantime, many companies have cleaned up their balance sheets, cut costs and focused on returning cash to investors. They're well positioned to withstand middling oil prices, and they're poised for big benefits if oil prices rise faster than expected.

Some corners of the energy market already sport a more bullish outlook. For instance, many U.S. energy companies are benefitting from the growth of liquefied natural gas, or LNG. U.S. companies produce natural gas at rock-bottom costs and transform it into a product that can be shipped to Asia or Europe. Closer to home, the builders of data centers that power AI are increasingly looking to natural gas as a source of power.

We found a handful of energy stocks that are bargains now and poised to prosper as the energy sector perks up. (Prices, yields and other data are as of November 30, unless otherwise stated.)

With revenue and a market value both around $9 billion, APA (APA) is a small company that acts like a big company — which may make it an appealing takeover target for an even bigger company. The shares currently trade at nine times estimated earnings for the next 12 months.

In the U.S., APA operates primarily in the Permian Basin of west Texas and New Mexico, an area responsible for nearly half of the country's oil production. APA, formerly known as Apache, also produces oil in Egypt, and it has offshore drilling projects off the coasts of Suriname and the U.K.

This collection of assets should catch the eye of major energy producers, says Smead, whose Smead Value Fund counts APA as one of its top 10 holdings.

He also suggests that APA's liabilities are an asset. The company's debt has an average interest rate of 5.5% and an average term of 13 years — attractive to a buyer looking to lower the cost of its debt and extend its maturity schedule, says Smead. "Can I go out and borrow billions of dollars over a 13-year duration at 5.5%? The answer is no, I can't."

Jay Peters, of Connecticut-based money manager NewEdge Wealth, holds APA for his clients and likes the stock, takeover or no takeover. "This is a company known for capital discipline, operational efficiency and really diversified production. Having that global footprint provides some insulation when you don't have a ton of certainty on prices here in the U.S."

The company's cost efficiencies and relatively low debt load position it well for when the energy cycle turns, Peters says. "You might have to be patient, but I think the upside is there for long-term investors."

In a relatively strong showing for an energy producer, APA stock has gained 8% in 2025 through November.

An AI tie-in

Instead of drilling for oil and gas, Baker Hughes (BKR) sells equipment to the companies that do drill. The firm is therefore known as an oilfield-services provider — but Baker now prefers to call itself an "energy technology" company thanks to its industrial and energy technology segment, which now accounts for close to half the firm's $28 billion in annual sales.

That emerging business serves LNG companies and the builders of data centers, and it's what prompts Stewart Glickman, director of equity research at CFRA, to rate the stock a Strong Buy.

"Baker can provide a lot of the tools" that make LNG processing and data centers viable, Glickman says. "That's a great place to be." He sees the stock trading at $61 in the next year, up 22% from its recent close.

The industrial and energy technology business is rescuing Baker Hughes from an otherwise troubling growth profile. In the quarter that ended September 30, revenue in the segment increased 15% from the previous year, compared with an 8% decline in Baker's oilfield-services business. The "growthier" division's backlog — orders from customers that the company hasn't yet fulfilled — reached $32.1 billion at the quarter's end. The segment is also more profitable than Baker's legacy business, Glickman says.

Analyst Marc Bianchi of investment firm TD Cowen says Baker's exposure to "diverse and growing end markets" should make the company's results less volatile than other oilfield-services companies. The shares trade at 20 times estimated earnings, according to S&P Global Market Intelligence, which is still below their historic average despite an AI-assisted gain of 22% in 2025 through November.

Diamondback Energy (FANG) is a case study in how an energy producer can thrive by focusing on one basin — in this case, the Permian.

The company has avoided costs associated with adapting to diverse geology, regulations and logistics, and it has lowered costs by simplifying its supply chain, says analyst Bob Brackett of investment firm Bernstein. That gives Diamondback the best well performance in the Permian's Midland Basin, with the most wells per section and the lowest per-well and corporate-breakeven costs.

Even though it sticks to just one area, the company has grown; it acquired Endeavor Energy in 2024 and Double Eagle in 2025. In 2012, the year Diamondback went public, it recorded just $75 million in revenue. In the 12 months that ended September 30, revenue topped $14.6 billion.

Acquiring land adjacent to parcels it already owns allows Diamondback to lower costs by using the same equipment and crews to drill just a little bit farther, says CFRA's Glickman. "Diamondback has routinely been able to squeeze costs out of its system year by year," he says, "so even though the oil-price forecast isn't super, Diamondback is continuing to make profit-margin improvements." Glickman has a Strong Buy rating on the stock, which trades at just 14 times estimated earnings. He sees the shares reaching $176 over the next 12 months, implying a gain of 15% from current levels and a change of course from Diamondback's 7% drop in 2025 through November.

Diamondback also intends to distribute 50% of its free cash flow (money left over after operating expenses and spending to maintain or upgrade property and equipment) to shareholders through a combination of stock buybacks, special dividends and a regular dividend payout that currently yields 2.6%.

After falling about 12% in 2025 through November, EOG Resources (EOG) trades at just 11 times earnings. It's far from damaged goods, however, with an impressive collection of assets, a disciplined history of growth and a commitment to send most of its cash flow back to shareholders.

"EOG really has almost no debt on its balance sheet — it's probably the premier balance sheet in the exploration and production space," says Peters of NewEdge Wealth, which owns the shares for the firm's clients. "That provides us a margin of safety in the event that we do see prices slide further."

EOG had more cash than debt for three years, until it closed an acquisition in August 2025; as of September 30, the company had $8.1 billion in debt, offset by $3.5 billion in cash. EOG could pay off those obligations with about 10 months' worth of profits.

Those earnings come from drilling projects across the U.S. The Houston-headquartered company operates close to home in Texas, Oklahoma and New Mexico; farther north in Colorado, Wyoming and North Dakota; and in the Appalachian Basin, which stretches through Ohio and Pennsylvania. As a bonus, it also has operations in Trinidad and Tobago. Oil accounts for the majority of EOG's production, but natural gas makes up about 30%.

Despite the geographic sprawl, EOG is a low-cost provider. Morningstar analysts Joshua Aguilar and Christian Fleming note that for the past decade, EOG has prioritized drilling wells that provide superior returns even at oil prices as low as $45 per barrel. EOG calls wells that can generate a 60% return at $45 oil "double premium" — and it says it has 10 years' worth of that inventory.

EOG says it plans to return most of its 2025 free cash flow to shareholders. The company combines an aggressive stock-buyback program that would take roughly 7% of its stock off the market with a dividend that yields 3.8%. EOG has also used special dividends in the past to return even more cash to shareholders in boom years, most recently 2022.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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Stocks are trading at record levels and valuations are stretched. While that by no means suggests the bull market has to end soon, it does make it harder to find names that industry analysts rate as bang-the-table buys.

True, the S&P 500 is pricey by a slew of metrics — but that's partly due to its market-cap-weighted construction. The Magnificent 7 stocks driving much of the bull run have a collective weighting of more than 30% in the benchmark index.

However, look at the equal-weight version of the index, in which every component accounts for 2%, and you'll see a more attractive picture.

While the S&P 500 gained nearly 40% since its early April bottom — and trades at more than 23 times forward earnings — the equal-weight S&P 500 is up a more modest 25% in the same span. As such, it trades at less than 18 times forward earnings.

That's not bad.

As the cliche goes: It's not a stock market; it's a market of stocks.

Meanwhile, third-quarter earnings season is underway, and the outlook for corporate profits, revenue and guidance is bright.

"Both the percentage of S&P 500 companies reporting positive earnings surprises and the magnitude of earnings surprises are above their 10-year averages," writes John Butters, senior earnings analyst at FactSet. "In addition, S&P 500 companies are reporting impressive numbers for revenues relative to analyst expectations and year-ago results."

Some of the strongest corporate profit margins since 2021 also helps explain why the market fetches its current multiple, notes DataTrek Research co-founder Nicholas Colas. "It also provides a pathway to even higher valuations," he adds.

Given this supportive backdrop for equities, we decided to suss out some of Wall Street's favorite stocks to buy now — and to see what the bull cases on these names looked like.

Targa Resources

Targa Resources (TRGP) is a top way to play a rebound in the midstream sector of the oil and gas industry. Analysts like the way it operates in nearly every segment of its industry and adore its geographic diversity.

When it comes to gathering, processing, transporting and storing natural gas and natural gas liquids (NGLs) in places such as the Anadarko and Permian Basins, analysts say Targa "overshadows" other energy companies.

"Expected completion of projects in the Permian and Delaware position Targa for further growth," writes Argus Research analyst John Staszak, who rates shares at Buy.

With shares down about 12% for the year to date, they look like a bargain. Analysts' average price target of $206.15 gives TRGP implied upside of about 33% in the next 12 months.

No wonder Argus has so much company in its bullish call. Of the 22 analysts covering TRGP surveyed by S&P Global Market Intelligence, 16 call it a Strong Buy, five say Buy, and one has it at Hold. That works out to a consensus recommendation of Strong Buy.

Take-Two Interactive Software

Video-game publisher Take-Two Interactive Software (TTWO) owns some of the strongest franchises in the massive industry. From Rockstar Games' Grand Theft Auto (GTA) series to NBA 2K from 2K Games, the company doesn't lack for lucrative hits.

Shares are up nearly 40% so far this year, but analysts say they have more room to run. All eyes are on the May 2026 release of Grand Theft Auto VI, which should be a major catalyst.

As important as GTA is to the company's fortunes, it's hardly a one-trick pony. TTWO releases a new edition of its NBA 2K game annually, while major franchises such as Red Dead Redemption, Borderlands and Civilization have historically helped it report beat-and-raise quarters.

That said, investors need to have confidence in the enduring popularity of GTA before they take the plunge into TTWO stock.

"Take-Two's prospects will always be more speculative than we'd prefer, as we think that it will always be dependent on developing the next massive hit," Morningstar notes.

Of the 27 analysts covering TTWO, 21 call it a Strong Buy, three have it at Buy, two rate it at Hold, and one has it at Strong Sell. That works out to a consensus recommendation of Strong Buy.

Boston Scientific

If you've ever undergone a minimally invasive medical procedure, chances are you've used something made by Boston Scientific (BSX). From stents and catheters to pacemakers and implantable defibrillators, BSX is critical to modern medicine.

Analysts say the company's strong pipeline, new product launches and additional acquisitions should continue to support revenue growth and margin expansion.

"BSX has a steady cadence of new product flow across its portfolio and is delivering above-industry growth, with particular outperformance over the past year-plus," notes Oppenheimer analyst Suraj Kalia, who rates shares at Outperform (the equivalent of Buy). "BSX is adding to the portfolio through tuck-in M&A and has several product tailwinds."

Shares are lagging the broader market by about 3 percentage points so far this year, but that just has them primed for outperformance, bulls say. Analysts' average price target of $126.14 gives BSX implied upside of about 25% in the next 12 months.

Of the 34 analysts covering BSX, 25 rate it at Strong Buy, seven say Buy, and two call it a Hold. That works out to a consensus recommendation of Strong Buy, and with high conviction to boot.

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It's no secret the market looks pricey by historical measures, but that doesn't mean there are no Buy-rated bargain stocks to buy.

We're all more than aware that the S&P 500 is trading at lofty valuations by a number of measures. How often have we been told that the market's forward price-to-earnings ratio (P/E) – the S&P 500 currently trades at 22 times next-12-months earnings – is perilously close to its historical high?

Indeed, as Savita Subramanian, head of U.S. equity strategy and U.S. quantitative strategy at BofA Global Research, notes: "On 19 of 20 metrics, the S&P 500 is trading at statistically expensive levels."

But that doesn't mean there are no bargains to be found. After all, as the cliche goes, it's not a stock market; it's a market of stocks.

To that end, we screened the S&P 500 for the best bargain stocks to buy, according to industry analysts. We sussed out high-quality names with cheap share prices on a relative valuation basis. We further limited ourselves to stocks scoring a rare consensus Strong Buy recommendation, according to data from S&P Global Market Intelligence.

We then dug into analyst research and recent returns to find three of the most promising names, which might surprise you. Tech and communication services stocks may get all the attention, but there's value to be found in the consumer discretionary, energy and materials sectors.

Hasbro

• Market cap: $11.6 billion
• Dividend yield: 3.4%
• Forward P/E: 15.8

Hasbro (HAS) has become something of a poster company for weathering trade shocks. The toymaker not only manufactures a significant portion of its products in China, but the Middle Kingdom is also a major market. Indeed, Hasbro recorded more than $1 billion in non-cash goodwill impairment charges this year due to the impact of tariffs.

And yet, shares have shaken off the shock, gaining more than 50% so far in 2025. Even better, analysts say Hasbro's valuation remains compelling, suggesting even more upside ahead.

"The company has consistently delivered on earnings and has topped estimates for the past seven quarters," notes Argus Research analyst Christine Dooley, who rates HAS stock at Buy. "It delivered again this quarter despite retailers delaying orders due to tariffs and economic uncertainty. The business is on track and fundamentals are good."

HAS stock goes for less than 16 times expected earnings – below its own five-year average P/E, and at a roughly 30% discount to the broader market, according to LSEG Stock Reports Plus. In addition to looking like a bargain, HAS offers an attractive dividend with an implied yield of 3.4%.

Of the 14 analysts covering the stock surveyed by S&P Global Market Intelligence, 10 rate it at Strong Buy, two call it a Buy and two have it at Hold. That works out to a consensus recommendation of Strong Buy.

SLB

• Market cap: $53.3 billion
• Dividend yield: 3.2%
• Forward P/E: 12.5

Bulls say SLB (SLB), the oilfield services giant formerly known as Schlumberger, has a unique ability to ride out subdued industrywide demand. True, shares are off about 5% so far this year, but that only makes the valuation more compelling.

Thanks to its $7.8 billion acquisition of ChampionX in July, and its diversification into offering digital services and data centers, SLB should be able to "navigate the environment until spending ramps back up," writes Susquehanna analyst Charles Minervino, who rates shares at Positive (the equivalent of Buy).

Accelerating international markets and pricing momentum provide upcoming catalysts to the energy stock, the analyst notes.

Meanwhile, SLB's price appears to be right. With a forward P/E of 12, SLB trades at a 25% discount to its own five-year average, as well as a discount of almost 50% to the broader market.

By price-to-sales, SLB trades at even steeper discounts to those benchmarks.

Then there's all the cash SLB is returning to shareholders. The company reaffirmed its plan to spend $4 billion on share repurchases and dividends in 2025, up from $3.27 billion in 2024.

Of the 30 analysts covering SLB, 19 call it a Strong Buy, nine say Buy and two have it at Hold. That translates to a consensus recommendation of Strong Buy.

Smurfit WestRock

• Market cap: $18.7 billion
• Dividend yield: 4.8%
• Forward P/E: 10.7

Smurfit WestRock (SW) shares have lost about a third of their value so far this year, but bulls argue that this leaves them trading at bargain-basement prices. After all, the company is still finding its feet.

SW was formed by the 2024 merger of Smurfit Kappa and WestRock Company, creating the world's largest paper packaging company. Smurfit WestRock's operations in 40 countries make it the revenue leader in the world of corrugated cardboard, containerboard, consumer packaging and more.

"We rate SW at Buy given its leading industry position in North American containerboard, allowing it to capitalize on the improving containerboard cycle, which we believe is entering a 'golden age' driven by balanced supply and demand," writes Truist Securities analyst Michael Roxland.

Moreover, SW expects $400 million in synergies (also known as cost cuts) as a result of the merger.

With a forward P/E of less than 11, SW trades at an 11% discount to its own five-year average, according to LSEG Stock Reports Plus. That valuation also represents a discount of 50% to the broader market. The dividend yield, at 4.8%, is pretty spicy compared to the S&P 500's yield of 1.2%.

Of the 16 analysts covering the materials stock, 11 rate it at Strong Buy and five have it at Buy. That works out to a consensus recommendation of Strong Buy.

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Berkshire Hathaway (BRK.B) was once again a net seller of stocks in its most recent quarter. But if you think Warren Buffett, who will step down as CEO at the end of 2025, has caught the "AI is a bubble" bug, think again.

The Oracle of Omaha has been easing off equities and hoarding cash for quite a while. In the past three years, Berkshire was a net seller of stocks to the tune of $190 billion. Also noteworthy is that Berkshire hasn't engaged in stock buybacks since May 2024.

As a result, Buffett is running a sort of "barbell" portfolio. Berkshire, with a market cap of more than $1 trillion, holds $280 billion in stocks and a whopping $380 billion in cash.

Berkshire's cash pile has been boosted by comparatively high short-term interest rates, as well from pruning its portfolio. Buffett once again pared BRK.B's stakes in major long-term holdings such as Apple (AAPL), Bank of America (BAC) in the most recent quarter.

The Apple sales are particularly noteworthy. Not too long ago, the iPhone maker accounted for roughly 40% of Berkshire U.S. equity portfolio. Today, it's closer to 23%.

For some folks, these are highly disquieting developments. When one of the greatest investors of all time is selling massive amounts of stock in some of his favorite names, it's understandable if people believe they would feel better about it if only they knew why.

First things first, however. Buffett took pains to explain to Berkshire shareholders at their annual meeting in May that the iPhone maker is still, er, the Apple of his eye. (It would have been embarrassing not to, considering Apple CEO Tim Cook attended the event in person.)

If Buffett has a problem with AAPL, it's that the value of Berkshire's stake has grown tremendously at a time when he expects corporate tax rates to rise, probably sometime in the not-too-distant future.

As Buffett told the Berkshire faithful in August 2024: "If I'm looking at a 21% rate this year and then we're [paying] a lot higher percentage later on, I don't think you'll actually mind the fact later on that we sold a little Apple this year."

Perhaps the same thinking informed Berkshire's paring of its stake in Bank of America. The fact that owning more than 10% of a publicly traded company's shares triggers disclosure requirements large shareholders would rather avoid for as long as possible is another reason to bring one's ownership below a regulatory threshold.

What we know is that Buffett has been a net seller of equities for 12 consecutive quarters. Share repurchases have ground to a halt, too. For context, Berkshire repurchased more than $9 billion worth of BRK.B stock in all of 2023.

This is not the sort of behavior one typically sees in someone with excessive confidence in equity prices.

What gives?

Buffett stocks sales: An expert's take

If Warren Buffett is selling stocks and not buying back his own, that might tell us something about the Oracle of Omaha's view of the market, writes Nicholas Colas, co-founder with Jessica Rabe of DataTrek Research.

As a multidecade market watcher and market participant, Colas posits three potential explanations for Buffett's "unusual activity."

The first explanation is that Buffett is calling a top. "Buffett sees stocks as overvalued, including his own, and therefore susceptible to a deep correction or outright bear market," Colas writes.

It's interesting that Berkshire holds $380 billion in cash. "That’s a lot of firepower if markets see a sustained drop," notes Colas. "While Berkshire is not especially expensive, its multiple may be worrisome to a value investor."

Don't forget that Buffett likes nothing more than to be greedy when others are fearful. If stocks crash, Berkshire will be able to go shopping for assets at deep discount prices.

M&A on tap

Then there's the possibility that Berkshire is amassing cash to effect a truly whale-sized deal. "Berkshire may have identified one or more large acquisitions and is raising capital for those purchases," Colas writes. He adds that BRK.B's $380 billion in cash would comfortably buy all of Coca-Cola (KO) or Goldman Sachs (GS).

Colas emphasizes that the latter two are only examples, not risk arbitrage trading ideas. They do make sense, however. Coca-Cola, a Buy-rated Dow Jones stock, has been a core Berkshire holding for four decades.

As for Goldman Sachs, Berkshire has been a major shareholder in the past. (Recall that Buffett gave GS an injection of capital during the Great Financial Crisis.)

Passing the baton

Lastly, Colas postulates that it's possible Buffett is simply preparing the company for his departure as CEO. (He will stay on as chairman.)

Perhaps Buffett "wants to clear the decks for his successors to remake Berkshire's portfolio and rethink the company's stock repurchase program," Colas says.

"At 95 years old, he has certainly earned the right to ride off into the sunset as one of the greatest investors of all time."

The bottom line

The most important takeaway from Colas' note: "We wouldn't read too much into Buffett's latest moves since there is more than one logical explanation for his actions."

Let's pause on that for a moment, because it's important. As folks have noted before, if copying Warren Buffett's buys and sells was all it took to become the next Warren Buffett, there would be a lot more Warren Buffetts in the world.

As far as we know, there is still only one.

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Whether you like it or not, members of Congress are allowed to buy and sell stocks. True, federal law prohibits them from using "nonpublic information derived from their official positions for personal benefit," and they're required to disclose their trades.

That said, it's understandable if folks don't quite trust politicians to be on the up and up when their personal fortunes might appear to be in tension with their duties as elected representatives.

Perhaps this is unfair; even cynical. But to modify a famous quote from Upton Sinclair, it's difficult to get a person to understand something when that person's salary depends upon the person not understanding it.

Take, for instance, the uproar around President Donald Trump, who said shortly before announcing a reversal on reciprocal tariffs that it "is a great time to buy stocks."

The reversal sparked a historic stock market rally and has some high-profile Democrats questioning if anyone in the Trump administration profited off the announcement.

Disclosure rules are supposed to help mitigate this problem. Thanks to these requirements, the public can follow what members of the House and Senate are doing with their investments.

Before we go further, please note that this activity shouldn't be used for trading purposes.

After all, insider buying and selling at publicly traded companies is voluminously disclosed and analyzed, but it doesn't really tell us much. That's because insiders – the executives and board members who know what's going on – can sell for any number of legitimate reasons, from paying tuition to portfolio diversification.

When it comes to stocks, insider buying is actually a more useful piece of information. And even then, it's not exactly a screaming buy signal.

Using insider activity among members of Congress as the basis for some kind of trading system is not a rigorous idea.

With those caveats out of the way, it is indeed interesting to see which stocks, bonds and private investments are most popular with members of the House and Senate. Perhaps more interesting is how certain pols churn their portfolios, which is to be avoided if you're a retail investor.

Have a look at the below table to see which politicians were the most active traders by volume over the past 90 days, according to data from Capitol Trades.

Stocks politicians are buying and selling

Look past the municipal debt and investments in limited liability companies, and you can see that pols are pretty normal when it comes to their buys. Top-rated Dow Jones stocks, mega-cap tech names and reliable and rising dividend-payers routinely make the list of our representatives favorite names.

Both sides of the aisle like many of the hottest stocks, including Apple (AAPL), Amazon.com (AMZN), Oracle (ORCL) and Broadcom (AVGO) these days – but then so does pretty much everyone else.

Interestingly, as much as Representative Ro Khanna (D-Calif.) is associated with tech investing, a number of his most recent biggest buys were stalwart blue chips such as JPMorgan Chase (JPM), the nation's biggest bank by assets, and Warren Buffett's Berkshire Hathaway (BRK.B).

Meanwhile, in addition to buying shares in speculative artificial intelligence (AI) firm BigBear.ai Holdings (BBAI), Representative Lisa McClain (R.-Mich.) also picked up Air Products and Chemicals (APD), which happens to be one the best dividend stocks for reliable dividend growth.

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Warren Buffett's Berkshire Hathaway (BRK.B) initiated small positions in Ulta Beauty (ULTA) and Heico (HEI) in the second quarter, bought more Chubb (CB), pared stakes in eight names – most notably, Apple (AAPL) and Chevron (CVX) – and exited bets on Paramount (PARA) and Snowflake (SNOW).

There were other moves, as well, but the biggest news to come out of Berkshire's latest regulatory filing was already known. Buffett slashed Berkshire's stake in Apple by almost half. As previously reported, the holding company also reduced its exposure to top holdings such as Chevron and Bank of America (BAC).

Keep in mind that Buffett told Berkshire shareholders that the Apple sales were done for tax purposes, as he expects corporate tax rates to rise sometime in the not-too-distant future. The same thinking could apply to BRK.B's other sales, but then it's not unusual for Buffett to be a net seller of equities when stocks are trading at record levels.

All told, Berkshire sold roughly $77 billion in equities in Q2 – mostly Apple – and purchased less than $2 billion. At any rate, with exactly 400 million Apple shares still in the portfolio, Buffett would appear to be done selling his favorite stock.

Earlier this year, the greatest long-term investor of all time said AAPL is "even better" than American Express (AXP) or Coca-Cola (KO), two "wonderful" businesses that Berkshire has owned since the early 1960s and late 1980s, respectively.

Perhaps it's a coincidence, but Berkshire now holds 400 million AAPL shares – or the exact same number of shares it has held in KO for decades. 

Before we detail Berkshire's quarterly buys and sells, it's important to know that Buffett has always maintained a highly concentrated portfolio. The top five holdings account for almost three-quarters of its U.S. equities portfolio value, while the top 10 account for more than 90%. 

As Buffett likes to say, diversification is for people who don't know what they're doing.

Stocks Warren Buffett is buying

Berkshire picked up two new stocks in Q2: Ulta Beauty and Heico. Berkshire bought 690,000 shares of Ulta Beauty worth $266 million at the end of the Q2. With a weight of 0.1% in the Berkshire Hathaway portfolio, or its 30th largest position, the cosmetics retail chain won't be moving the needle much on Berkshire's returns.

Meanwhile, with a weight of just 0.07%, Heico is even less material. Berkshire accumulated a little more than 1 million shares in the supplier to the aerospace industry. The stake was worth $185 million as of the end of Q2. 

The comparatively small size of the purchases could mean they were initiated by Buffett's co-portfolio managers Ted Weschler or Todd Combs.

On the other hand, one of the largest additions Berkshire made in Q2 was probably the work of Buffett himself. As previously disclosed, BRK.B bought another 7 million shares in Occidental Petroleum (OXY). (Buffett has added to OXY on weakness in the past.) The holding company owned 255 million shares worth $16 billion at the end of the quarter. At 5.8% of its portfolio, OXY is Berkshire's sixth largest holding.

In another interesting move, Buffett also added to Chubb, the insurance company Berkshire first picked up just a quarter ago. The holding company increased its stake by 4.3%, or more than 1 million shares. With roughly 27 million shares worth $6.9 billion at quarter's end, Chubb accounts for a hefty 2.5% of the portfolio, or Berkshire's ninth largest holding.

Elsewhere, Berkshire fiddled with some of its smallest positions, upping its bets on rather immaterial holdings such as Liberty Sirius XM Group, Series C (LSXMK) and Liberty Sirius XM Group, Series A (LSXMA). Note that the company cut its stakes in the tracking stocks last quarter. Berkshire also bought more Sirius XM Holdings (SIRI) – a position it reduced in Q1.

Stocks Warren Buffett is selling

As noted above, Apple accounted for almost all of Berkshire's Q2 sales. Other reductions included Chevron, a Buy-rated Dow Jones stock, which Buffett first purchased four years ago. In Q2, Berkshire cut CVX by 3.6%, or 4.4 million shares. With 119 million shares worth $18.6 billion at the end of the quarter, the integrated oil major is Berkshire's fifth largest holding.

Other sales included a more than 20% reduction in Capital One Financial (COF). Berkshire sold 2.7 million shares in the financial services company in Q2, bringing its position down to 9.8 million shares worth $1.4 billion. With a 0.49% weight in the portfolio, COF is Berkshire's 19th largest bet. 

Berkshire also continued to clean and prune a number of its mid-level equity holdings, paring its stakes in T-Mobile US (TMUS), Louisiana Pacific (LPX), Liberty Media (LLYVK), Liberty Media (LLYVA) and specialty retailer Floor & Decor (FND).

Buffett also closed out its stake in Paramount, dumping all 7.5 million shares. The company first bought PARA in early 2022. It didn't work out.

Lastly, Berkshire exited its position in Snowflake (SNOW), which is believed to have been the work of subaltern Todd Combs. Berkshire made a rare bet on an initial public offering (IPO) with Snowflake in the third quarter of 2020. SNOW has an all-time total return of negative 16%.

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Warren Buffett's Berkshire Hathaway (BRK.B) slashed its stake in Apple (AAPL) by almost half during the second quarter, further rattling a tech sector already under scrutiny over its massive spending on AI – and naturally unnerving some Apple shareholders, too.

After all, Apple stock has been the single largest position in the Berkshire Hathaway equity portfolio for years, typically carrying a weight in excess of 40%. And yet Buffett has been paring Berkshire's enormous Apple stake at an alarming rate in 2024.

He's also taken something off the top of Berkshire's second largest holding, Bank of America (BAC).

Buffett has said his preferred holding period is forever. It's also important to know that Buffett is not, and has never been, a market timer. Furthermore, he has had nothing but praise for Apple – calling it "Berkshire's third business" – and openly admires Bank of America CEO Brian Moynihan. 

So what's going on?

Stay tuned for churn

We won't get the full details of which stocks Warren Buffett bought and sold in the second quarter until Berkshire Hathaway discloses its changes in holdings after the market closes on August 14. 

What we do know now is that this isn't the first time Buffett has taken a big bite out of Berkshire's Apple stake this year. As we wrote at the time, BRK.B cut its position in AAPL by 13% in the first quarter. Keep in mind that Buffett was explicit that this was done for tax purposes: 

"Buffett took pains to explain to Berkshire shareholders at their annual meeting in Omaha on Saturday that the iPhone maker is still, er, the Apple of his eye. (It would have been embarrassing not to, considering Apple CEO Tim Cook attended the event in person.)"

If Buffett has a problem with AAPL, it's that the value of Berkshire's stake has grown tremendously at a time when he expects corporate tax rates to rise, probably sometime in the not-too-distant future. 

As Buffett told the Berkshire faithful: "If I'm looking at a 21% rate this year and then we're [paying] a lot higher percentage later on, I don't think you'll actually mind the fact later on that we sold a little Apple this year."

Buffett pointed out that Berkshire's corporate tax rate was 35% just a few years ago. Back in the late 1960s, it was more than 50%. This man has been around a long time. He knows tax policy is never written in stone.

Perhaps Buffett's calculus explains the thinking behind the BAC sales too. As with Apple, Berkshire has enjoyed outsized returns from its investment in Bank of America. Indeed, Buffett liked the bank so much that Berkshire received special regulatory approval to acquire more than 10% of its shares outstanding. That's commitment.

The bottom line is that whatever Buffett is up, it's actually sort of irrelevant. He is a professional capital allocator. It's his job to maximize the returns on the capital entrusted to him. You either trust Warren Buffett or you don't. If you don't trust him, fine. You're not going to hurt his feelings. His track record sort of speaks for itself.

More selling to come

If today's news bothered you, you might want to skip next Wednesday. That's because Berkshire Hathaway tends to be a net seller of equities when stocks are at record highs. 

The holding company sold $77 billion worth of stock in Q2, mostly Apple. But do not be surprised if we learn that Buffett & Co. trimmed or exited positions in any number of other holdings when Berkshire files its Form 13F with the Securities and Exchange Commission after markets close on August 14. 

Buffett has this funny habit of trying to buy stocks when they are selling at lower prices rather than higher prices. Stocks are pretty pricey these days. Buffett is selling. What's the mystery?

By the way, some folks might try to use Buffett's buys and sells as signals for what to do with their own portfolios. 

That would be silly. 

As noted above, Buffett is not a market timer. This is the man who wrote in The New York Times in October 2008 that he was buying stocks. The market didn't bottom until months later, in March 2009. 

"A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful," Buffett said. 

No, Buffett didn't bottom-tick the S&P 500's 50% collapse. The market fell another 28% from the time he penned that op-ed to equities' nadir. And all Buffett did was buy shares in great companies at cheaper and cheaper prices, probably the entire way down. (Berkshire shareholders then benefited by riding those prices all the way back up.)

As much fun as it might be to see which stocks Warren Buffett is buying and selling, you cannot copy his moves and expect to get the same returns. There are a bunch of reasons for this, but let's keep it simple: Buffett has access to a massive pile of really cheap capital and you don't.

You're no Warren Buffett

Berkshire's timing could have been better. It didn't do market sentiment any favors by releasing its results ahead of a global rout in equities that was mostly sparked by what's happening to the Japanese yen. But that's not on Buffett.

Markets go down as well as up. Pullbacks are normal. "The average drawdown from peak-to-trough in a given year in the U.S. stock market going back to 1928 is -16.3%," notes Ben Carlson, director of institutional asset management at Ritholtz Wealth Management. "Since 1950, the S&P 500 has had an average drawdown of 13.6% over the course of a calendar year."

Volatility is the price of admission to the stock market. The greater the reward, the greater the risk. If you can't handle the equity risk premium, stick to bonds.

In the meantime, leave professional capital allocation to the pros. Word is Warren Buffett is pretty good at it.

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Have you ever noticed that equity investors can't have nice things? As miserable as we are when stocks are going down, we're even more unhappy when they're going up.

There's an empirical explanation for this psychological phenomenon. It's called "loss aversion." Humans are at the mercy of all sorts of cognitive biases, and one of the more perverse ones is that we experience far more pain from losing money than we experience pleasure from winning the same sum.

That's why when markets are rising, stocks are said to be climbing a wall of worry. The higher stocks climb, the more investor anxiety mounts. That's loss aversion at work.

Cut to today, with markets at record highs and valuations stretched by just about any metric you care to use, and it's only natural for investors to question if stocks are in a bubble.

Stocks never go up in a straight line, but that's pretty much what the S&P 500 did after bottoming out early last spring. From its April 7, 2025, intraday low to its close on December 31, the benchmark index was up 41.6% on a price basis. Such a torrid run has U.S. equities trading at some of their very priciest levels in history, according to BofA Securities.

As of December 31, on 18 of 20 metrics the S&P 500 was trading at statistically expensive levels, according to a note to clients from Savita Subramanian, head of U.S. equity strategy and U.S. quantitative strategy at BofA Global Research. Four of the metrics — Market Cap to GDP, Price to Book, Price to Operating Cash Flow and Enterprise Value to Sales were at record highs.

Is the stock market in a bubble? Here's how to tell

Happily, valuation is not a timing tool, as strategists take pains to point out. As Subramanian suggests, opportunities remain for investors willing to look for selective sector opportunities

Meanwhile, though questions remain about when and whether the Federal Reserve will cut interest rates amid a backdrop of broadening and accelerating profits, it's not hard to argue for a boom in earnings-per-share and GDP growth.

It's also possible that stocks have structurally re-rated to carrying richer valuations, as Subramanian noted earlier in 2025.

"The S&P 500 has changed significantly from the 80s, 90s and 2000s," explains Subramanian. "Perhaps we should anchor to today's multiples as the new normal rather than expecting mean reversion to a bygone era."

Perhaps most important, bubbles are as much of a psychological phenomenon as a financial one.

There's no substitute for experience on Wall Street, which is why it's always wise to listen to old hands when it comes to divining the market's machinations. Nicholas Colas, co-founder with Jessica Rabe of DataTrek Research, started working full-time on Wall Street in 1986. He lived through the October 1987 stock market crash and has witnessed every boom and bust up close ever since.

Colas has developed a three-point checklist for "spotting unhealthy, runaway markets." Here's a thumbnail version:

The market for initial public offerings gets frothy. Although the number of IPO announcements hit a multiyear high in the third quarter, the market for new issues has been subdued since it peaked in 2021. Higher interest rates and the availability of private-market funding remain headwinds.

"The good news is that history shows a rampant IPO market is a clear sign of a top," Colas notes. "We're nowhere close to that now."

Hallmark mergers and acquisitions (M&A) deals. "Exceptionally bad deals happen at the top, even if at the time they seem quite sensible," Colas writes. "M&A activity is ultimately a function of CEO/board confidence. Just like retail investors chasing hot IPOs at a market peak, senior managers fall prey to the same overconfidence that the good times will last forever."

Happily, M&A activity, while picking up, also remains under control. Through November 30, M&A volume was up 2% year over year in 2025, according to PwC.

A double is a bubble. Colas has a general rule to identify unsustainably high prices in a range of markets. Whenever the S&P 500 doubles in three years or less, stock prices decline shortly thereafter. The same is true about the Nasdaq Composite over any rolling one-year window going back to the early 1970s, notes Colas.

"A double is a sign of speculative excess because macro conditions are never so different that asset prices should rise 100% over a short period of time," Colas says. "Markets are reasonably good discounting mechanisms. When prices double, you know speculation — not fundamentals — are driving those gains."

Even the Nasdaq Composite, which is the frothiest equity market right now, is up "only" 20% over the past year.

Another tech bubble?

The remarkable bull market in equities was given fresh fuel by the Federal Reserve's jumbo interest rate cut in September 2024, but it's uncertain how much more fuel monetary policy can provide from here. Meanwhile, bubble anxiety centers around the AI companies, such as the Magnificent 7, that dominate the S&P 500 and Nasdaq-100.

Naturally, echoes of the bursting of the dot-com bubble are tat the op of anxious investors' minds.

"The introduction of transformative technologies typically attracts growing investor interest as well as significant capital and new competition," writes Peter Oppenheimer, chief global equity strategist and head of macro research Europe at Goldman Sachs. "As enthusiasm builds and stock prices increase, the sum of individual company valuations can overstate the total potential aggregate returns; often a bubble develops and bursts."

Oppenheimer notes the technology sector has generated 32% of the global equity return and 40% of the U.S. equity market return since 2010. This reflects stronger fundamentals rather than irrational exuberance.

"In our view, the technology sector is not in a bubble and is likely to continue to dominate returns," the strategist adds. That said, "concentration risks are high, and investors should look to diversify exposure to improve risk-adjusted returns while also gaining access to potential winners in smaller technology companies and other parts of the market."

Are stocks in a bubble?

None of Colas' time-proven indicators point to a stock market bubble, but a bubble very much remains a possibility in 2026, Colas says. Keep an eye on IPOs, M&A and how fast market levels rise from here.

Also remember that while the explosive growth in all things AI has valuations looking stretched, Goldman Sachs' Oppenheimer notes, "valuations often also understate the opportunities that can accrue in the nontechnology industries that can leverage the technology to generate higher returns."

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Venerable General Electric (GE), once the longest-serving member of the Dow Jones Industrial Average, will officially split into two companies at the start of next month.

And the old GE name is going away. 

GE will spin off GE Vernova on April 2, which will then start trading on the New York Stock Exchange (NYSE) under the ticker GEV. Holders of GE common stock will receive one share of GE Vernova common stock for every four shares of GE common stock held as of March 19.

Importantly, GE shareholders will continue to hold their shares of GE common stock – but now with the company name GE Aerospace, GE said in a press release. Meanwhile, GE Aerospace will continue GE's listing on the NYSE under the ticker symbol GE.

GE Vernova houses the former conglomerate's gas power and renewable energy business. GE spun off GE HealthCare Technologies (GEHC) in January 2023. 

GE first announced its decision to split into three companies focusing on aviation, healthcare and energy, respectively, in 2021.

Better times for GE stock?

GE stock is a long-time market laggard, but it has clobbered the broader market over the past year – and especially since its board set the GE Vernova spinoff date.

If you go back two decades, GE sports an annualized total return (price change plus dividends) of just 2%. The S&P 500 generated an annualized total return of more than 10% over the same period. Over the past 10 years, GE lagged the broader market by about 11 percentage points.

But GE's decision to split up helped change sentiment on the name. Its price performance is much more encouraging since it decided to split, with upside accelerating as the spinoffs came to fruition. GE's annualized total return easily tops the S&P 500 over the past five years, and doubles the broader market's returns for the trailing three-year period. 

Cut to today, and GE has been clobbering the broader market. Shares are up 85% on a price basis over the past 52 weeks, vs 26% for the S&P 500. For the year-to-date, GE is sitting on a 25% price gain, vs the broader market's 7%.

Even better, Wall Street likes the "new" GE's prospects as GE Aerospace going forward.

Of the 17 analysts covering the stock surveyed by S&P Global Market Intelligence, five call it a Strong Buy, two say Buy, six have it at Hold and three rate it at Sell. That works out to a consensus recommendation of Buy, with solid conviction. 

Bulls argue that GE Aerospace has significant advantages over rivals, among other reasons to be constructive on the stock. 

"Comparing its engine business vs its closest peers, we continue to see GE outperforming in the coming years," writes Morgan Stanley analyst Matt Akers, who rates the stock at Overweight (the equivalent of Buy). "GE's commercial engine fleet is approximately three times larger than its competitor's, giving it a bigger base to spread costs."

The analyst adds that GE's commercial engine fleet stands out vs peers due to better demographics. "Nearly two-thirds are mid-life engines in their prime aftermarket period," Akers notes. 

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Shopping for stocks when markets are struggling with a June swoon might not seem like the best idea. Between rising bubble anxiety and mounting uncertainty over the direction of monetary policy, it's understandable if investors are reluctant to put cash to work these days.

On the other hand, markets rarely top out at this time of year. As Ryan Detrick, chief market strategist at Carson Group notes, the most recent all-time high for the S&P 500 was on June 2.

"Stocks soared for the two months off the late March lows, so some weakness in June isn't a big surprise," he writes. "June is the only month in history that hasn't seen the ultimate peak for the year. We don't think this year will be the first one to peak in June."

At the same time, not only has a strong corporate earnings season lifted sentiment, but forward earnings estimates are marching higher. In turn, rising expected operating profits have helped make valuations more attractive.

Besides, every market features select names that are set to outperform.

Although the Magnificent 7 stocks have done much of the bull market's heavy lifting, that hardly means these names are doomed to underperform from here. Indeed, many of them are in pronounced drawdowns. At the same time, a rotation out of these stocks has capital flowing to other, sometimes sleepier, sectors.

As we'll see below, five of Wall Street's top-rated S&P 500 stocks to buy hail from the Magnificent 7. Companies from the financial, healthcare and industrials sectors are ably represented, too.

How we found analysts' top-rated S&P 500 stocks

It's well known that industry analysts are reluctant to slap Sell ratings on the names they cover. There are several reasons for this, some more defensible than others.

What's less commonly understood is that Strong Buy recommendations, while not nearly as rare as Sell calls, are in somewhat short supply, too.

If you run a screen of the S&P 500 using data from S&P Global Market Intelligence, you'll see that analysts assign a consensus Sell recommendation to only one stock.

At the other end of the ratings spectrum stands the Street's highest recommendation of Strong Buy. A total of 52 stocks made the cut there as bullish sentiment soars.

First, a note on our methodology: S&P Global Market Intelligence surveys analysts' stock recommendations and scores them on a five-point scale, in which 1.0 equals Strong Buy and 5.0 means Strong Sell.

Any score below 2.5 means that analysts, on average, rate the stock a Buy. The closer the score gets to 1.0, the stronger the Buy call.

In other words, lower scores are better than higher scores.

Have a look at the chart below to see the 52 stocks in the S&P 500 that score an elite Strong Buy recommendation from industry analysts. Investors who fear it's too late to buy Amazon.com (AMZN), Microsoft (MSFT) or Nvidia (NVDA) will be happy to see they easily made the list.

As much as artificial intelligence (AI) is driving capital spending and market sentiment, analysts see plenty of reasons to be bullish on names across multiple sectors. Here we highlight what Wall Street has to say about three less sexy stocks on the list this month.

GE Aerospace

GE Aerospace (GE), which retained the classic GE ticker following the 2024 spinoff of GE Vernova (GEV), has seen its shares take off as the company establishes itself as a high-margin, pure-play aerospace leader with significant competitive moats.

In a report titled "No sign of stopping the growth engine; reiterate Buy," BofA Securities analyst Ronald Epstein said the company's "robust demand and best-in-class execution support double-digit growth in 2026."

The analyst likes the stock over the longer haul, too, noting that GE Aerospace is well-positioned to benefit from the ongoing ramp-up in commercial aircraft production and sustained aftermarket demand. "Following the spin-off of GE Vernova, we see the company as leaner and focused on execution and safety," Epstein added.

Meanwhile, the company's robust free cash flow – which exceeded $5.7 billion last year – allows GE to aggressively fund R&D and investments in manufacturing infrastructure, all while continuing to return cash to shareholders. GE boosted its dividend by nearly 30% last year. At the same time, it repurchased more than $7 billion in stock.

Shares have delivered only market matching returns so far in 2026 (after adding more than 86% last year), but that just has the stock priced for outperformance, Wall Street says. Of the 22 analysts covering GE, 16 rate it at Strong Buy, three say Buy and two call it a Hold. A lone analyst has a sell recommendation on the name. Nevertheless, that works out to a consensus recommendation of Strong Buy.

Smurfit WestRock

After losing about a quarter of their value in 2025, Smurfit WestRock (SW) shares are beating the broader market by about 4 percentage points this year, and bulls say they are just getting started. After all, the company is still finding its feet.

SW was formed by the 2024 merger of Smurfit Kappa and WestRock Company, creating the world's largest paper packaging company. Smurfit WestRock's operations in 40 countries make it the revenue leader in the world of corrugated cardboard, containerboard, consumer packaging and more.

"We see long-term upside potential and expect earnings growth congruent with growth in e-commerce and growth in demand for sustainable paper and packaging goods," writes Argus Research analyst Alexandra Yates, who rates shares at Buy. "We also expect to see margin growth with operational efficiency improvements in the coming quarters."

Moreover, SW expects $400 million in synergies (also known as cost cuts) as a result of the merger.

With a forward P/E of less than 14, SW trades at 36% discount to the broader market. The dividend yield, at 4.2%, is pretty spicy compared to the S&P 500's yield of less than 1.1%.

Of the 15 analysts covering the materials stock, 10 rate it at Strong Buy and five have it at Buy. That works out to a consensus recommendation of Strong Buy.

Visa

Warren Buffett was a long-time admirer of Visa (V), so it was something of a surprise to see CEO Greg Abel boot it from the Berkshire Hathaway equity portfolio in early 2026.

Happily for continuing shareholders, Wall Street remains bullish on the nation's largest payments processor. Shares are off about 6% over the past year – vs a 26% gain for the broader market – but that just has Visa priced for outperformance amid the relentless war on cash, bulls say.

"Visa remains well positioned to benefit from the ongoing shift to electronic payments and remains one of our top ideas," writes Oppenheimer analyst Rayna Kumar, who rates shares at Outperform (Buy).

The company is enjoying massive growth in value-added services, such as fraud protection, consulting and data analytics. Not only are these high-margin services; they create higher switching costs for banks and merchants. This stickiness helps Visa hold a dominant position in the business-to-business space.

Interestingly, the Street hasn't been this collectively bullish on the name in 16 years. Of the 39 analysts covering Visa, 29 rate it at Strong Buy, seven say Buy and three have it at Hold.

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The S&P 500 Dividend Aristocrats index looks only a little different as we head into the second half of the year. 

Widely regarded as some of the best dividend stocks for dependable dividend growth, the S&P 500 Dividend Aristocrats is an index of S&P 500 companies that have raised their dividends for at least 25 consecutive years.

That's kind of a big deal if you are a long-term equity income investor. Regular dividend hikes not only increase the yield on an investor's original cost basis over time, often quite dramatically; they also help investors sleep better at night.

After all, any company that manages to raise its dividend year after year – through recession, war, market crashes and more – is demonstrating both its financial resilience and its commitment to returning cash to shareholders.

S&P Dow Jones Indices, which rebalances the index quarterly, ditched Walgreens Boots Alliance (WBA) at the beginning of 2024 after the pharmacy chain slashed its dividend by almost half.

Walgreens had increased its dividend every year for nearly half a century before the cut. Analysts, who regularly give WBA one of the lowest rankings of all 30 Dow Jones stocks, applauded the decision to take cash earmarked for shareholders and invest it back into the business. 

Perhaps most interesting is what will happen to long-time member 3M (MMM). The Dow stock is on the Aristocrats chopping block after slashing its dividend as part of its Solventum (SOLV) spin off. 3M is expected to be cut from the list of dependable dividend payers when S&P Dow Jones next rebalances the index.

Dividend Aristocrats Fastenal and Kenvue

The Dividend Aristocrats membership list remains at 67 stocks, however, as Fastenal (FAST) was added to the index in the first quarter of 2024. The industrial supplier has raised its dividend for 25 consecutive years, making it available for inclusion in the index. 

Most recently, Fastenal declared a quarterly cash dividend of 39 cents per share to be paid on February 29 to shareholders of record as of February 1. The company generated more than $1 billion in levered free cash flow in fiscal 2023, and that was after paying out more than a billion dollars in dividends. 

Fastenal stock sports a dividend yield of 2.4%, which is fairly generous for an Aristocrat. The exchange-traded fund that tracks the index, the ProShares S&P 500 Dividend Aristocrats ETF (NOBL), has a dividend yield of 2.1%. 

Other changes to the Dividend Aristocrats over the past year include the removal of VF Corp. (VFC) and the addition of Kenvue (KVUE), which was spun off from fellow Aristocrat Johnson & Johnson (JNJ). 

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Warren Buffett's Berkshire Hathaway (BRK.B) initiated a small stake in The New York Times Company (NYT) in the fourth quarter but continued to pare back bets on core holdings such as Apple (AAPL) and Bank of America (BAC).

Buffett, who stepped down as CEO at the end of 2025 but remains chairman of the holding company, continued to cut Berkshire's exposure to equities as the market hit record highs.

In what was perhaps a nod to stretched valuations, Berkshire was once again a net seller of stocks, with net sales of approximately $4 billion in Q4. The holding company has now sold more stocks than it has bought for 13 consecutive quarters.

While exact figures will have to wait until Berkshire releases quarterly earnings on February 28, it's estimated that the company was a net seller of stocks to the tune of $14 billion in 2025.

Over the past three years, Berkshire sold more than $190 billion worth of equities. Also noteworthy is that Berkshire hasn't bought back its own stock since May 2024.

With a market cap of more than $1 trillion, Berkshire maintains a sort of "barbell" portfolio, as it holds approximately $280 billion in stocks and more than $380 billion in cash.

Although Berkshire has become more cautious, it did do some shopping in Q4. In addition to buying NYT, the holding company increased stakes in four of its holdings.

Before we get into Berkshire's most recent buys and sells, it's important to know that Buffett has always run a highly concentrated portfolio.

Excluding the company's Japanese brokerage stocks and other overseas equities, Apple alone accounts for more than a fifth of Berkshire's stock portfolio. (That's down from more than 40% at its peak.)

Furthermore, Berkshire's top five U.S. equity holdings comprise about 70% of its portfolio value, while the top 10 account for 88%.

As Buffett likes to say, diversification is for those who don't know what they're doing.

Also, please note that while Warren Buffett traditionally managed Berkshire Hathaway's largest equity positions, the management structure has officially transitioned.

Buffett has confirmed that CEO Greg Abel now oversees the entire portfolio, supported by investment manager Ted Weschler. Notably, Todd Combs – who previously managed a portion of the portfolio alongside Weschler – departed in late 2025 to take a role at JPMorgan Chase (JPM).

Stocks Warren Buffett is buying

Berkshire boosted its biggest bet in the energy sector, increasing its stake in Chevron (CVX) by almost 7%, or more than 8 million shares. Berkshire, which has owned the Buy-rated Dow Jones stock since the fourth quarter of 2020, now owns more than 130 million shares worth $19.8 billion as of the end of Q4. With a weight of more than 7% in the portfolio, CVX is Berkshire's fifth-largest holding.

In a boost of confidence for Chubb (CB), Berkshire once again upped its stake in the insurer. The holding company, which first bought CB in the first quarter of 2024, increased its position by more than 9%, or almost 3 million shares. With a market value of $10.7 billion as of December 31, CB remains the eighth-largest Berkshire Hathaway holding.

Elsewhere, Berkshire made minor additions to four of its smaller holdings.

Berkshire continued to add to its investment in Domino's Pizza (DPZ), which it initiated in the third quarter of 2024. The holding company increased its stake by more than 12% and now owns nearly 3.4 million shares in the pizza chain worth $1.4 billion as of the end of Q4. However, with a weight of 0.5% in the portfolio, DPZ is Berkshire's 20th-largest position.

As noted above, Berkshire initiated a small stake in NYT, purchasing 5 million shares worth $352 million at the end of Q4. With a weight of about 0.1%, the stake is Berkshire's 30th-largest position.

Lastly, Berkshire made an incremental and essentially immaterial additional investment in Lamar Advertising (LAMR). With a market value of $152 million, LAMR accounts for less than 0.1% of the portfolio.

Stocks Warren Buffett is selling

Buffett continued to pare back Berkshire's position in Apple, which, as recently as 2024, accounted for roughly 40% of its U.S. holdings. The company sold more than 10 million shares over the course of the fourth quarter – a 4% reduction – but Buffett has hardly lost faith in the iPhone maker.

With nearly 228 million shares worth $62 billion as of December 31, AAPL remains Berkshire's largest holding by far, accounting for nearly 23% of the portfolio's total value.

In another reprise from previous quarters, Buffett once again sold Bank of America stock, which has been a major holding since 2017. Berkshire reduced its investment in the nation's second-largest bank by assets by another 9% in Q4, selling more than 50 million shares.

With 517 million shares worth more than $28 billion as of December 31, BAC is Berkshire's third-largest holding, accounting for more than 10% of the portfolio value.

In other sales, Berkshire continued to ease up on DaVita (DVA), its 11th-largest holding, but only by 1.3%. The company also reduced exposure to Constellation Brands (STZ), a stake it initiated at the end of 2024, by 3%.

Other stocks Berkshire pared its stakes in included Aon (AON), Pool Corp. (POOL), Liberty Latin America Class A (LILA) and Atlanta Braves Holdings (BATRK).

Interestingly, Berkshire's most significant reduction in percentage terms was its stake in Amazon.com (AMZN). The conglomerate cut its position by 77%, offloading nearly 8 million shares of the Magnificent 7 stock. With a market value of approximately $525 million, Amazon has tumbled from Berkshire's 17th-largest holding at the end of Q3 to its 27th-largest position as of year-end 2025.

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Chevron (CVX) stock caught its second analyst upgrade in as many days Thursday, and investors surely appreciated the good news. After all, shares in the integrated oil and gas giant are lagging the broader market by a wide margin this year.

Tough comparisons against 2022 – a blowout year for profits as oil prices soared amid Russia's invasion of Ukraine – are just one headwind for Chevron. Fears of a recession settling in later this year are keeping a lid on oil prices, and that's also hurting CVX's prospects.

There's more to the bearish case on Chevron, but suffice to say, much of Wall Street isn't head over heels in love with the stock's chances. If you take a look at analysts rankings of all 30 Dow stocks, CVX isn't anywhere near the top. 

Two upgrades in two days has certainly improved Chevron stock's position, however. The latest move came Thursday when RBC Capital Markets analyst Biraj Borkhataria lifted his recommendation on CVX stock to Outperform (the equivalent of Buy) from Sector Perform (Hold). The analyst also lifted his price target on CVX stock to $180 from $165.

On Wednesday, J.P. Morgan analyst John Royall upgraded Chevron stock to Neutral (Hold) from Underweight (the equivalent of Sell), while lifting his target price to $170 from $161.

Both analysts cite Chevron's defensive characteristics – notably its fortress-like balance sheet – which is a common theme among CVX bulls.

Chevron stock's high implied return

Of the 26 analysts issuing recommendations on Chevron stock surveyed by S&P Global Market Intelligence, eight say it's a Strong Buy, five have it at Buy and 13 call it a Hold. That works out to a consensus rating of Buy, with moderate conviction.

Meanwhile, the Street's average price target of $186.48 gives CVX stock implied upside of 22% in the next 12 months or so. Add in the dividend yield, and Chevron's implied total return comes to more than 26%.

Chevron stock is off about 15% for the year-to-date on a price basis vs a nearly 10% gain for the S&P 500. The latest analyst upgrades would suggest that CVX is attractively priced at current levels.

Warren Buffett is certainly a big fan. The chairman and CEO of Berkshire Hathaway (BRK.B) has settled on CVX as one of just two investments in the energy sector. (Occidental Petroleum (OXY) is the other bet.)

Although Buffett reduced Berkshire's CVX stake by about 18% last quarter, the oil major remains one of the most important stocks in the Berkshire Hathaway portfolio. At the end of March, Berkshire owned 132.4 million CVX shares worth $20.2 billion at current levels. With ownership of 7% of Chevron's common stock, Berkshire Hathaway is the energy firm's third largest shareholder after Vanguard and BlackRock. 

No one on the Street rates CVX at Sell, but it's understandable why so many analysts are sitting on the sidelines at Hold. The latest upgrades – and Buffett's conviction on the name – should at the very least give Chevron bulls some confidence. Perhaps we'll even see something of a floor put under CVX's price in an otherwise disappointing 2023. 

Oneok's (OKE) $18.8 billion deal for Magellan Midstream Partners (MMP) announced over the weekend shouldn't come as too much of a surprise. After all, the oil and gas pipeline and storage industry has been ripe for consolidation. What perhaps did take investors off guard was the steep drop in Oneok stock when markets opened Monday.

While it's not uncommon for shares in an acquiring company to falter after making a deal announcement, Oneok stock gapped down as much as 10% at one point soon after the opening bell. Magellan Midstream Partners stock, for its part, popped 15% on the news.

All mergers and acquisitions come with risk, naturally. But the Oneok-Magellan deal, which would create an oil and gas pipeline giant, is especially tricky, analysts say.

UBS Global Research analyst Brian Reynolds said he expected a negative market reaction to the Oneok merger announcement. Not only is the deal dilutive to existing shareholders because of the added debt, but it also requires Oneok shareholders to accept a strategy of diversification into the oil side of the oil & gas transportation and storage industry. 

Magellan specializes in crude oil and refined products, while Oneok's core operations are in gas pipelines, natural gas liquids and natural gas gathering and processing.

"We think investors will resist a leverage dilutive deal in the current macro environment, as benefits from diversification, earnings per share accretion and free cash flow accretion will ultimately be a 'show me' story," Reynolds wrote in a note to clients.

The analyst maintained his Buy recommendation on Oneok stock, but he did remove it from his "Top Picks" list. 

Oneok stock: buy the dip?

To recap: on Sunday, Tulsa, Oklahoma-based Oneok said in a press release that it will acquire all outstanding units of Magellan in a cash-and-stock transaction valued at approximately $18.8 billion, including assumed debt.

Magellan shareholders will receive $25 in cash plus 0.6670 shares of Oneok common stock for each outstanding Magellan common unit. That represents a 22% premium to May 12 closing prices. Oneok will also assume $5 billion of Magellan's debt.

The company resulting from the transaction will have a total enterprise value of $60 billion, Oneok said. In the oil and gas pipeline industry, only Kinder Morgan (KMI), with an enterprise value of $74 billion, and The Williams Cos. (WMB), at $62.2 billion, would be more valuable than the combination of Oneok and Magellan, according to data from S&P Global Market Intelligence. 

Oneok said the Magellan deal adds a "leading, and primarily fee-based, refined products and crude oil transportation business" to its existing operations. 

"Magellan's stable, primarily demand-driven businesses are expected to generate significant free cash flow due to low capital expenditure requirements," Oneok added. "This acquisition creates a more resilient energy infrastructure company that is expected to produce stable cash flows through diverse commodity cycles."

Oneok's desire for diversification is eminently understandable given sluggish economic forecasts, rising recession fears and an increasingly uncertain energy outlook.

Truist Securities analyst Neal Dingmann, who rates OKE stock at Buy, said the acquisition "notably boosts" Oneok's scale and potentially signals more deals to come.

"We view the deal as largely positive given the relatively low valuation versus recent deals and the potential earnings growth profile of the assets all while maintaining largely solid financial," Dingmann wrote in a note to clients. Oneok branching out into the oil business should also deliver significant cost savings, the analyst added.

"From an operational standpoint, we think the complementary nature of the assets could result in the company hitting at least $200 million of operational synergies once the companies become fully integrated," Dingmann said.

Although Wall Street is generally bullish on Oneok stock, giving it a consensus recommendation of Buy, conviction is lukewarm. Of the 18 analysts covering OKE surveyed by S&P Global Market Intelligence, six call it a Strong Buy, three say Buy, eight have it at Hold and one slaps a rare Strong Sell rating on the name.

With an average target price of $71.69, the Street gives Oneok stock implied price upside of about 20% in the next 12 months or so. Add in the high dividend yield, and the implied total return comes to roughly 26%.

The market gave something of an initial thumbs down to what Reynolds rightly calls a "show me" story. That said, the selloff in Oneok stock does appear to provide an attractive entry point for optimists. Even the Street's lowest price target of $61 gives Oneok stock implied price upside of about 6% in the next 12 months or so. Add in the dividend yield, and the implied total return tops 12%. 

The pending deal could serve as an overhang on OKE stock for some time. And the operational results won't be known until well after the merger closes. For now, at least, analysts are sticking with Oneok, betting that the risks of the Magellan acquisition will be well worth the rewards.

Following an unexpected announcement by OPEC+ producers to cut output, oil prices have surged. The global benchmark, Brent crude, had a 5.31% increase in cost, rising to $84.13 a barrel. The U.S. benchmark, WTI, surged to $79.83 a barrel, a 5.48% increase.

In total, cutbacks in production will be over one million barrels a day as a “precautionary measure aimed at supporting the stability of the oil market,” says one Saudi energy ministry official, according to Al Jazeera. Cutbacks include 500,000 barrels a day cut by Saudi Arabia, 211,000 barrels a day cut by Iraq, 144,000 barrels cut by the United Arab Emirates and 128,000 barrels cut by Kuwait. Additionally, Russia’s cut of half a million barrels per day would extend through the end of the year. 

The White House reacted negatively to these cuts, with one spokesperson for the National Security Council stating, according to CNN, “We don’t think cuts are advisable at this moment given market uncertainty — and we’ve made that clear. We’re focused on prices for American consumers, not barrels.”

This rise in oil prices could cause inflation to remain higher for longer, complicating the Fed’s efforts to curb inflation, which they’ve been doing by continuously raising interest rates since March 2022. It will also further complicate ties between Saudi Arabia and the United States, as the U.S. has been appealing for increased oil output in order to lower energy prices. 

Kristian Coates Ulrichsen, a Gulf expert at Rice University’s Baker Institute for Public Policy, stated, according to PBS, that “domestic interest takes precedence in Saudi decision-making over relationships with international partners and is likely to remain a point of friction in U.S.-Saudi relations for the foreseeable future.”

OPEC, or the Organization of the Petroleum Exporting Countries, is a group of 13 major-oil exporting nations with the goal of regulating global oil prices through reductions and increases in production. In 2016, OPEC organized with 10 non-OPEC oil-producing countries to form OPEC+. At the end of 2021, OPEC Member Countries held 80.4% (1,241.82 billion barrels) of the world's crude oil reserves.  

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More than a century after American magnate John D. Rockefeller built a petroleum empire through Standard Oil — at its peak, the company controlled roughly 91% of U.S. oil production — its legacy still looms large in today's market.

Some of the biggest players in the energy sector today can trace their corporate roots directly to the 34 operating companies created by Standard Oil's historic breakup. The list features Exxon Mobil (XOM), Chevron (CVX), BP (BP) and Marathon Petroleum (MPC), among others.

Today, there's no reason for prospective energy investors to go piecemeal trying to put Standard Oil back together. There are many good reasons to skip the stock-picking altogether and opt for an energy ETF instead.

Why buy energy ETFs?

Energy ETFs are often viewed through a one-dimensional lens: primarily as a way to speculate on commodity prices. That perception makes sense at first glance, given the basic mechanics of how an integrated oil and gas company earns revenue.

Such firms extract crude oil or natural gas, process and refine it, and then sell it in various forms. When energy prices rise, it means better margins on those products, stronger earnings and, ultimately, higher stock prices. That dynamic is what draws traders and short-term investors looking to ride a price rally.

But that's just one of many ways energy ETFs can fit into your portfolio.

Another key use case is inflation hedging. During the high-inflation, rising-rate environment of 2022, when most funds struggled, energy ETFs stood out as one of the few that posted gains. That’s because inflation tends to lift the input costs across the economy, including oil and gas. And inflation is on the rise again due to the war in Iran.

Energy producers who sell those inputs can benefit from higher prices and pricing power, making them a rare winner when everything else is getting squeezed.

Finally, many of the largest energy companies have gotten incredibly lean and efficient in recent years. They've paid down debt, boosted margins and focused on capital discipline, which has led to record levels of free cash flow — essentially the money left over after paying for operations and maintenance.

With all that excess cash, they’ve ramped up shareholder returns through stock buybacks and, more notably, paying dividends. Energy giants routinely offer dividend yields that far surpass the broader market, making energy ETFs an appealing option for income-focused investors.

How we chose the best energy ETFs to buy

To narrow the field, we focused only on broad energy sector ETFs, funds that provide diversified exposure across the entire oil and gas value chain.

The energy industry is typically divided into three core segments: upstream (exploration and production), midstream (transportation and storage, including pipelines) and downstream (refining and distribution of end products like gasoline).

While there are plenty of niche ETFs targeting just one part of this chain — such as master limited partnerships (MLPs) or the companies drilling for oil and gas — we excluded those in favor of funds with broad coverage across two or more segments.

We also excluded leveraged and inverse energy ETFs, which are generally geared toward short-term trading, not long-term investing. These products reset daily, and compounding effects over time can result in returns that deviate significantly from the underlying benchmark.

Additionally, we left out commodity ETFs that trade oil, natural gas or refined fuel futures contracts. These tend to carry complex tax treatment — often issuing Schedule K-1 forms at tax time — and come with higher expense ratios and elevated volatility.

Lastly, while clean energy is undoubtedly a vital part of the global energy transition, it occupies a niche of its own. So don’t expect to see any solar, wind or nuclear-focused ETFs on the list.

This roundup is specifically geared toward conventional energy ETFs that provide diversified access to the oil and gas industry in all its stages. From there, we applied our usual three-part ETF selection framework:

Fees: Investors should avoid paying more than 50 basis points (0.5%) annually for a sector ETF in 2026, especially when many solid options charge well under that threshold.

Liquidity: A good ETF should be easy to trade, with a tight 30-day median bid-ask spread that minimizes hidden transaction costs.

Reputability: We prioritized ETFs from established issuers with strong track records and sufficient assets under management (AUM) to reduce the risk of fund closure due to lack of investor interest.

With that in mind, here are five of the best energy ETFs to buy.

Data is as of June 14.

• Assets under management: $38.1 billion
• Expense ratio: 0.08%, or $8 annually for every $10,000 invested
• 30-day median bid-ask spread: 0.02%
• Dividend yield: 2.6%

The Energy Select Sector SPDR Fund (XLE) draws from a narrow subset of 25 energy stocks contained in the S&P 500, so it’s made up almost entirely of large-cap companies that meet the index’s earnings quality screen.

Because it’s market cap-weighted, the larger a company is, the more it dominates the fund; Exxon Mobil and Chevron alone account for 38.6% of the portfolio.

Still, this ETF remains a favorite thanks to its rock-bottom fees, deep liquidity and an available options chain for more advanced strategies.

Learn more about XLE at the State Street Global Advisors provider site.

• Assets under management: $11.8 billion
• Expense ratio: 0.09%
• 30-day median bid-ask spread: 0.03%
• Dividend yield: 2.5%

The Vanguard Energy ETF (VDE) is a more diversified alternative to XLE, with 111 holdings drawn from the broader MSCI US Investable Market Index (IMI)/Energy 25/50. That means it includes mid-cap stocks and small-cap stocks in addition to the usual large-cap stocks.

The fund is still market cap-weighted, though, so Exxon Mobil and Chevron dominate but to a lesser degree than in XLE.

VDE’s options chain isn’t as robust as XLE’s, with fewer available strike prices, expiry dates and contract open interest, which makes the fund better suited as a buy-and-hold position for long-term investors.

Learn more about VDE at the Vanguard provider site.

• Assets under management: $2.4 billion
• Expense ratio: 0.4%
• 30-day median bid-ask spread: 0.05%
• Dividend yield: 2.7%

The energy sector doesn’t end with the Exxon Mobil and Chevron duo. Global giants such as Shell (SHEL) and BP in the U.K., TotalEnergies (TTE) in France and Canadian Natural Resources (CNQ) and Enbridge (ENB) in Canada are all major players.

U.S.-only ETFs such as XLE and VDE miss these names entirely, making the iShares Global Energy ETF (IXC) a strong alternative for those seeking international exposure.

The fund tracks 50 companies in the S&P Global 1200 Energy 4.5/22.5/45 Capped Index, offering market cap-weighted exposure to global energy leaders.

Though it’s about four times as expensive as its U.S.-focused peers, IXC is still liquid and delivers a higher yield, making it a worthy trade-off for access to international holdings.

Learn more about IXC at the iShares provider site.

• Assets under management: $1.9 billion
• Expense ratio: 0.084%
• 30-day median bid-ask spread: 0.03%
• Dividend yield: 2.5%

There's more than one way to structure an energy index, and the Fidelity MSCI Energy Index ETF (FENY) — VDE's closest competitor — tracks the MSCI USA IMI Energy Index.

It currently holds 105 energy stocks in a market cap-weighted portfolio. As expected, Exxon Mobil and Chevron dominate the top spots.

While the benchmark differs from that of VDE or XLE, the overall exposure and historical performance are very similar.

With nearly identical fees and trading liquidity, FENY also works well as a tax-loss harvesting partner for either VDE or XLE.

Learn more about FENY at the Fidelity provider site.

• Assets under management: $566.8 million
• Expense ratio: 0.4%
• 30-day median bid-ask spread: 0.05%
• Dividend yield: 2.1%

The Invesco S&P 500 Equal Weight Energy ETF (RSPG) is one of the best energy ETFs to buy if you want to stick with U.S.-listed companies but don’t want a portfolio dominated by Exxon Mobil and Chevron.

RSPG tracks the S&P 500 Equal Weight Energy Plus Index, which includes all 21 energy sector stocks in the S&P 500 and assigns each an equal weight regardless of market cap.

The higher expense ratio for RSPG may be a worthwhile trade-off for investors looking to sidestep concentration risk and gain more balanced exposure to the sector.

Learn more about RSPG at the Invesco provider site.

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Oil stocks as a group have been market laggards since the S&P 500 bottomed out late last year. If there's any solace to be found, it's that analysts say rising demand and lower inventories should help the top-rated oil stocks outperform in the second half of 2024 and beyond. 

Oil stocks are underperforming for a bunch of reasons, but an underappreciated factor might be that the majority of the bull market's gains have been driven by the Magnificent 7 stocks and excitement over all things AI. 

But slower economic growth, a softening jobs market and the cumulative effect of years of above-average inflation have also been a weight on the sector. Happily, concerns about the state of consumer spending appear to have been overblown.

"Many U.S. consumers have indeed faced weakening finances in 2024, but their demand for crude oil products has proved resilient," write Wells Fargo Investment Institute analysts Mason Mendez and John Laforge. "After a soft start to the 2024 driving season, U.S. crude oil demand has improved and is now in-line with its typically strong seasonal pattern."

Indeed, the U.S. four-week consumption average hit its highest point of the year in late June, the analysts add. At the same time, U.S. airport travel activity notched a record high of 2.82 million passengers per day in the final week of June.

The improving backdrop for demand has helped the S&P 500's energy sector close some of its performance gap with the broader market midway through the year, but it still has catching up to do. For the year to date through mid-July, the S&P 500 was up 17% on a price basis. The energy sector of the S&P 500 trailed the broader S&P 500 by about 5 percentage points.

How to find the best oil stocks

In order to find the best oil stocks to buy now, we started by screening the S&P 500's oil & gas sector for Wall Street analysts' top-rated names. 

Here's how the ratings process works: S&P Global Market Intelligence surveys analysts' stock ratings and scores them on a five-point scale, where 1.0 equals Strong Buy and 5.0 means Strong Sell. Any score of 2.5 or lower means that analysts, on average, rate the stock a Buy. The closer the score gets to 1.0, the stronger the Buy call. In other words, lower scores are better than higher scores.

We further limited ourselves to stocks with more than 10 Strong Buy recommendations (in order to ensure adequate analyst coverage and sample size). Lastly, we dug into research, fundamental factors, valuation, analysts' estimates and other data on the top names.

Our screen served up both familiar names and smaller players. Have a look at the table below to see Wall Street's best oil stocks to buy now.

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Investors who missed out on the massive move in oil and gas stocks this year are probably kicking themselves right about now. But we have good news for them.

Even after beating the market by more than 50 percentage points for the year-to-date, analysts say the energy sector still sports a few oil and gas stocks with plenty of upside left to give.

Rapidly rising energy prices have made oil and gas stocks runaway winners in an otherwise downbeat 2022. Remember: Only three of the S&P 500's sectors are positive for the year-to-date – utilities, consumer staples and energy – and only the latter has really wowed anyone with its performance.

Oil and gas stocks' hot run raises the obvious argument that much of the easiest money may already have been made. The energy sector was up nearly 44% for the year-to-date through April 15 – a period in which the S&P 500 logged a decline of almost 8%. (For the record, utilities added 6.3%, while consumer staples tacked on 2.5%.)

Ordinarily, any time stocks move that far that fast, further upside becomes (at least theoretically) more limited. As future earnings get priced in and valuations become stretched, analysts grow increasingly cautious for good reasons. But Wall Street says at least a handful of oil and gas stocks still have plenty of room to run.

To find them, we screened the energy sector of the Russell 3000 for stocks with implied upside of at least 20% in the next 12 months or so, based on analysts' average price targets. We limited ourselves to Buy-rated names with minimum market values of $3 billion. Additionally, the stocks had to have a minimum of 10 Buy recommendations from industry analysts, of which at least five had to be Strong Buy ratings.

Our screen left us with the following five most promising names. Have a look at these five oil and gas stocks, all of which are poised to deliver even more market-beating returns in the year ahead.

Prices, price targets, analysts' consensus recommendations and other data are as of April 15, courtesy of S&P Global Market Intelligence and YCharts, unless otherwise noted. Stocks listed in reverse order of one-year implied upside.

• Market value: $7.5 billion
• Dividend yield: 1.3%
• Analysts' consensus recommendation: 1.43 (Strong Buy)
• One-year implied upside: 20%

Shares in PCE Energy (PDCE, $77.87) were up nearly 60% for the year-to-date through April 15, but the Street says they have more room to run.

Analysts praise the exploration and production (E&P) company's strong fourth-quarter results, equally robust 2022 outlook and, most importantly, its ability to generate free cash flow (FCF, the cash remaining after a company's expenses, capital expenditures and financial commitments are met.)

"We remain Buy-rated on PDCE given the company's strong FCF profile and newly announced commitment to return 60%-plus of post-dividend FCF to shareholders in the form of its growing base dividend and share repurchases," Goldman Sachs analyst Umang Choudhary says.

Analysts also applaud PDC's February acquisition of Great Western Petroleum, a transaction valued at $1.3 billion. Truist Securities analyst Neal Dingmann (Buy) says additional "low-cost, accretive M&A transactions" could provide further catalysts for PDCE stock.

The Street's consensus recommendation on PDC Energy comes to Strong Buy, per S&P Global Market Intelligence. Nine analysts rate the stock at Strong Buy, four say Buy and one has it at Hold.

Meanwhile, only a handful of oil and gas stocks have as much potential upside as PDCE shares, at least according to the analyst community. The pros' average price target of $93.14 gives PDCE implied upside of 20% in the next 12 months or so.

• Market value: $39.9 billion
• Dividend yield: 4.4%
• Analysts' consensus recommendation: 1.82 (Buy)
• One-year implied upside: 21%

Shares in oil and gas refiner and marketer Phillips 66 (PSX, $82.85) are leading the S&P 500 by more than 20 percentage points so far this year, and the Street sees even more market-beating returns ahead.

With an average target price of $100.06, analysts give PSX stock implied upside of 21% in the next 12 months or so. Add in the generous dividend, and the projected total return comes to more than 25%.

That's why the refinery stock gets a consensus recommendation of Buy, with fairly high conviction. Six analysts rate shares at Strong Buy, eight say Buy and three have them at Hold.

Analysts praise PSX's financial strength, diversification and "long history of returning excess cash to shareholders" via buybacks and dividends.

"Balance sheet strength and place on the cost curve are critical, and favor refining and marketing companies that are well positioned to manage their businesses in a range of oil price scenarios," writes Argus Research analyst Bill Selesky (Buy). "PSX is one of these companies, as it benefits from its size, scale and diversified business portfolio."

At Goldman Sachs, analyst Neil Mehta (Buy) continues "to see underappreciated value at Phillips 66," noting that shares have underperformed relative to peers this year.

• Market value: $13.8 billion
• Dividend yield: 1.5%
• Analysts' consensus recommendation: 1.79 (Buy)
• One-year implied upside: 22%

Surging oil and gas prices are helping E&P play Ovintiv (OVV, $53.18) "right size" its balance sheet, analysts say, which will allow it to return even more cash to shareholders.

"We remain Buy-rated on OVV given its enhanced FCF profile relative to peers, coupled with the company's upcoming shareholder returns inflection to 50%-plus of FCF (from 25% currently) as the balance sheet improves," writes Goldman Sachs analyst Neil Mehta.

At Truist Securities, analyst Neal Dingmann (Buy) is likewise bullish on OVV's rising free cash flow, return of cash to shareholders and debt reduction efforts. He adds that the company "could also add an accretive moderate acquisition in the coming months while not materially changing its shareholder return plans."

The bottom line, bulls say, is OVV is a turnaround story that really is starting to turn. That's why shares in the oil and gas stock – up nearly 60% for the year-to-date – have plenty more outperformance ahead.

Indeed, with an average target price of $64.90, analysts give OVV stock implied upside of 22% in the next 12 months or so.

Ten analysts rate OVV at Strong Buy, nine say Buy and five call them a Hold, per S&P Global Market Intelligence. That works out to a consensus recommendation of Buy, with fairly high conviction.

• Market value: $24.6 billion
• Dividend yield: 1.7%
• Analysts' consensus recommendation: 1.63 (Buy)
• One-year implied upside: 22%

Diamondback Energy (FANG, $138.44), an oil and gas E&P firm, gets a consensus recommendation of Buy, with high conviction. Although shares are up more than 28% for the year-to-date through April 15, investors can still reap outsized rewards in the year ahead, analysts say.

Indeed, with an average 12-month price target of $168.25, the Street gives FANG implied upside of 22%.

Once again, the investment thesis hinges on keeping capex down, and cash to shareholders up.

"Management remains committed to capital discipline, FCF generation and shareholder returns," writes Raymond James analyst John Freeman (Strong Buy).

Freeman notes that FANG recently increased its base dividend by 20% to $2.40 per share annually.

"FANG's priority will remain a consistent and growing base dividend," the analyst adds, "but the company will also complement that base dividend with either share buybacks or variable dividends to return 50% of FCF to shareholders."

At CFRA Research, analyst Stewart Glickman highlights FANG's rising dividend and the favorable macroeconomic backdrop in making his Buy case for shares.

"With tighter markets expected in 2022, which should yield strong pricing, we believe FANG is positioned for a strong year," Glickman writes.

Seventeen analysts rate the oil and gas stock at Strong Buy, while another 10 say Buy and five call it a Hold.

• Market value: $12.1 billion
• Dividend yield: 3.1%
• Analysts' consensus recommendation: 1.45 (Strong Buy)
• One-year implied upside: 24%

Chesapeake Energy (CHK, $94.36), a natural gas E&P company, is tops for upside among these oil and gas stocks, and it makes UBS Global Research's list of Top Picks for 2022, thanks to rising prices for natural gas and other factors.

Chesapeake, like PDCE, is benefiting from strategic acquisitions. In early March, the company closed its deal for privately held Chief E&D Holdings for $2.6 billion. That represents the firm's second major acquisition since late 2021. Most importantly, it allows CHK to return even more cash to shareholders.

"Base dividends will increase to 50 cents a share," writes UBS analyst Lloyd Byrne (Buy). "Recall in January, CHK increased its annual dividend by about 14% to $2.00 per share and maintained the $1 billion stock buyback program." (The company also pays variable dividends based on adjusted free cash flow.)

Although the favorable gas market has propelled CHK to a gain of more than 45% for the year-to-date through April 15, analysts say it's still undervalued. Indeed, with an average target price of $116.70, the Street gives CHK stock implied upside of 24% in the next year or so.

Little wonder, then, that analysts' consensus recommendation comes to Strong Buy. Of the 11 analysts covering the stock surveyed by S&P Global Market Intelligence, seven rate it at Strong Buy, three say Buy and one calls it a Hold.

If you've recently filled up your tank, you may have noticed that your wallet feels a bit lighter. That's because gasoline prices have surged to a decade-plus high of $4.25 per gallon according to AAA amid a host of factors, the largest of which include the crisis in Ukraine and supply-demand imbalances.

But while skyrocketing gas prices are hurting consumers, they're creating a boon for the energy sector – including refining stocks.

Refiners take raw crude oil and natural gas, send it through a chemical process and turn it into products we can actually use. This includes gasoline, jet fuel and diesel. The secret to the refiner's operational success is called the "crack spread," which measures the difference between the value of gasoline and crude oil – and is used to approximate a company's potential profit margin.

When crack spreads are wide, refiners profit more. And right now, crack spreads are agape. According to the latest Energy Information Administration (EIA) report, the average RBOB-Brent crack spread – a widely used measure – jumped 67% between Feb. 28 and March 3, and is well above the average for this time of year.

In plain English, these could be sunny days for the major refining stocks – especially if more countries join the U.S. in banning Russian oil. Overall, these booming crack spreads should result in better earnings for refiners down the pike. And given the propensity for energy stocks to share those earnings through dividends and buybacks, investors could profit handsomely as well.

Here are three refining stocks to benefit from surging gas prices. Each of the names featured here served up solid results to end 2021 – and could continue to deliver as oil prices keep rising.

Data is as of March 8. Dividend yields are calculated by annualizing the most recent payout and dividing by the share price.

• Market value: $37.1 billion
• Dividend yield: 4.3%

When it comes to refining stocks, no one is bigger than Valero (VLO, $90.54). With 15 refineries in the U.S. and Canada, Texas-based VLO is the largest independent refiner in the world.

Moreover, Valero is the second-largest producer of renewable fuels like ethanol and biodiesel. This massive size and scope combined with the variety of refined products under its umbrella has suited the stock well throughout its history. Within this large system, VLO is able to extract every margin of profit out of crack spreads and each barrel of crude that travels through its facilities.

"The company's disciplined strategy in recent years has positioned VLO at the forefront of top-tier refining operations, while the footprint in both renewable diesel and now carbon capture is well ahead of the energy industry," says Raymond James analyst Justin Jenkins (Strong Buy).

You can see this in the company's latest earnings report. Thanks to rising fuel demand and better crack spreads, revenues at VLO surged 116% year-over-year to $35.9 billion in the fourth quarter of 2021. Meanwhile, adjusted earnings arrived at $2.47 per share compared to a per-share loss of 88 cents in the year-ago period.

These top- and bottom-line results are impressive for sure, but where the increasing crack spreads and earnings growth can really be felt is in Valero's cash flows. Thanks to relatively stable fixed costs for downstream sectors, refining stocks tend to throw off plenty of cash flows.

VLO, for instance, was able to reap $5.9 billion in net cash from its operating activities in fiscal 2021. With such hefty cash flows, Valero has quickly become a shareholder-rewards champion, sending $1.6 billion of that cash back to shareholders through dividends. Over the last decade, VLO has grown its dividend 20.7%, on average, annually. The firm has also been prudent in using that excess cash to reduce its debts.

In the end, when it comes to refining stocks, Valero's huge footprint and wide moat make it a top name in the sector. And as an added bonus, VLO sports a healthy dividend yield of 4.65% and below-market forward price-to-earnings (P/E) ratio of 13.5x (the forward P/E for the S&P 500 is 19.2x).

• Market value: $37.0 billion
• Dividend yield: 4.4%

Phillips 66's (PSX, $84.31) strategic focus in the downstream industry makes it one of the best refining stocks as well.

Yes, Phillips refines crude oil into gasoline, diesel and jet fuel through its 12 refineries. It also sells that gasoline and other products at its more than 8,800 independently owned outlets. This allows it to profit from the improving crack spreads and overall fuel demand.

Last quarter, PSX's refining segment managed to realize pre-tax income of $346 million. This compared to a pre-tax loss of $1.1 billion in the third quarter. Clearly, the increase in spreads and overall demand is working wonders for the company's bottom line.

Another win for Phillips 66 is that it is a petrochemicals giant.

Thanks to its joint venture with Chevron (CVX), Phillips is a major producer of high-density polyethylene (HDPE) plastic, polypropylene plastic and various other chemicals. Like gasoline, petrochemicals can come with various spreads that determine prices – and typically, margins on these products are high to begin with. There's more value-add for the chemical crackers.

As the economy moves toward the endemic phase of the COVID-19 crisis and growth has returned, demand for plastic and other chemicals is surging. For all of 2021, PSX managed to report record earnings in its chemicals segment.

For shareholders, the strong performance across its various divisions has made PSX a reward powerhouse. With its $6.0 billion worth of operating cash flow, Phillips managed to reinvest in its business, pay down debt and increase its quarterly dividend by 2.2% to 92 cents per share. This continues PSX's long streak of making shareholders happy.

Going forward, there's plenty of growth to be had for the firm. In addition to rising demand and better spreads for chemicals and gasoline, PSX should see increased synergies and earnings related to its buyout of its master limited partnership (MLP) subsidiary Phillips 66 Partners (PSXP).

In the here and now, PSX stock is one of the cheapest refining stocks out there, with a forward P/E ratio of 11x. At the same time, its yield is a market-beating 4.4%. Phillips 66 is a different piece of the refining puzzle, but is well worth a closer look.

• Market value: $2.8 billion
• Dividend yield: N/A

When you stop by a Mobil service station, you know you're getting gasoline produced by Exxon Mobil (XOM). However, there are plenty of convenience stores and other fuel stops that are part of larger chains. We're talking about your Casey's (CASY), Sheetz, Wawa's, Love's Travel Stops, etc. of the world. These stores don't own downstream refining assets and the gasoline they sell is often unbranded, meaning it is fuel sold without a brand name attached to it. And in many instances, that gasoline comes from refiner PBF Energy (PBF, $23.54).

PBF was formed back in 2008 as a joint venture between European refiner Petroplus and private equity group BlackStone (BX). The pair purchased a series of small independent refineries across the U.S., cobbled them together and created PBF.

Since its creation, PBF has grown by roughly double. Today, the firm owns and operates six domestic oil refineries, with throughput of over 1,000,000 barrels per day. With PBF being one of the largest producers of non-branded gasoline, it is in a position to play the growth in demand from other service stations.

True, demand at these third-party stations declined during the early days of the pandemic and PBF was hit pretty hard. Because of its smaller size, the firm was forced to suspend its dividend and go into cash-preservation mode. The firm even divested some assets to raise cash.

More recently, PBF has shown signs of strength. For starters, the stock is up nearly 40% in the last 12 months. Plus, the company managed to end 2021 with nearly $1.3 billion in cash on its balance sheet. And income from operations for the full fiscal year came in at $597.2 million – a notable improvement over the $1.4-billion loss PBF incurred for all of 2020. If results continue to improve, investors may see the dividend reinstated as well.

While PBF is riskier than the other refining stocks on this list, it does represent a higher-growth opportunity and the potential for a big turnaround.

Crude oil prices continued their relentless rise higher Tuesday after the U.S. announced a Russian oil ban. But market strategists are urging investors not to overreact to the latest inflationary shock.

Recession talk is premature, for one thing. The equity market, while broadly humbled, is hardly broken. And opportunities for outperformance remain, at both the equity and sector level – especially in energy stocks – according to analysts and strategists.

Most importantly, panicking never did any investor any good, anyway.

"The macroeconomic indicators do not give hope for a quick recovery, compounded by the continuing Russia-Ukraine war," says Kunal Sawhney, CEO of independent equity research firm Kalkine. "However, freaking out at the possibility of a longer period of disruption won't help."

The Russian oil ban, announced last Tuesday by President Joe Biden, includes not just Russian crude, but also liquefied natural gas and coal. Global benchmark Brent crude oil prices broke above $132 a barrel on the news.

Although the ban's effect on the U.S. is expected to be minimal – America imported only about 8% of its crude oil and refined products from Russia last year – it is not merely symbolic. Oil prices are set globally, and average U.S. gas prices are now topping $4.27 a gallon, according to AAA. That's the highest nominal level on record, beating previous highs set in 2008. (Adjusted for inflation, gas set a real all-time high of $5.26 a gallon in July 2008.)

However, as unnerving as the prospect of the worst energy shock in 50 years may be, we're a long way from doomsday, experts say.

"Surging oil prices can't singularly trigger a recession, and it would take more than sky-high energy prices for the consumer impact to become recessionary," notes David Bahnsen, chief investment officer for The Bahnsen Group, a Newport Beach, California- based wealth management firm with more than $3.5 billion in assets under management.

Stock Opportunities From the Russian Oil Ban

Bahnsen adds that opportunities remain in energy stocks even amid their red-hot run. The S&P 500 energy sector is up 42% for the year-to-date vs. a decline of more than 12% for the S&P 500. But Bahnsen says midstream companies, which transport and store oil, can offer attractive returns.

UBS Global Research analyst Brian Reynolds also sees select opportunities in the energy sector. Rising gas prices could hurt oil refiners if they curtail consumer demand, he says. Therefore, the analyst prefers companies that are "closer to the wellhead."

As such, Reynolds top picks include Cheniere Energy (LNG, $139.01), Targa Resources (TRGP, $68.62) and Energy Transfer (ET, $10.34)

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Exploration and production (E&P) companies with "notable" cash flow paying off high-priced debt should likewise benefit from rapidly rising energy prices, says Truist analyst Neal Dingmann. E&P stocks most likely to benefit from that dynamic include Continental Resources (CLR, $60.35), Callon Petroleum (CPE, $60.68) and Occidental Petroleum (OXY, $55.38), among others.

Per OXY, note well that Warren Buffett's Berkshire Hathaway (BRK.B, $322.72) recently bought 91 million shares in Occidental Petroleum worth $5.1 billion.

Taking a broader view, Goldman Sachs strategists recommend investors overweight their exposure to the energy sector, as well as healthcare and profitable technology sector stocks.

However, interesting opportunities can be found all over the market.

For example, Jefferies analyst Stephen Volkmann upgraded shares in Caterpillar (CAT, $196.70) – the world's largest manufacturer of heavy construction and mining equipment – to Buy from Hold on March 8.

"We believe Russia's incursion into Ukraine resets the global economy and will drive pressure for Western nations to seek and secure key mined, energy and agricultural commodities," Volkmann writes. "Additional capacity for mining, oil & gas, LNG, pipelines, etc., will be required, and CAT should be a clear beneficiary of these investments."

But many – and probably most – buy-and-hold investors should just take it easy for now.

Although active investors might want to explore some of the ideas mentioned above, the bulk of retail investors would do well to stick to their long-term plans and goals.

Steven Ricchiuto, U.S. chief economist at Mizuho Securities USA, says that although the risk of an outright recession is "very low" and stock market valuations are "below a sensible" level, it's still "much too early to consider adding to positions."

Bahnsen concurs. After all, there's nothing wrong with being patient while preparing for the market's next move.

"If the stock market declines another 5% to 10%, investors should look to rebalance and use the pullback to add to exposure to the core holdings of their portfolios," Bahnsen says.

If you've had to fill up your gas tank or heat your home lately (so, most of us), you might have noticed that your wallet is a lot lighter than usual. That's because oil and gas prices have been surging over the past few months amid a perfect storm of supply-demand imbalances and rising geopolitical tensions.

But while these pressures have been miserable for consumers, they have been a boon to energy stocks, including energy master limited partnerships (MLPs).

MLPs, which first began to form in the 1980s, are a type of "pass-through entity." That's because their income isn't taxed at the corporate level, and is instead "passed through" directly to owners and investors via dividend-esque "distributions." This system typically results in much-higher-than-average yields, often in the 7%-9% range.

Better still, because of what they own – most energy MLPs hold midstream infrastructure such as pipelines and storage facilities – depreciation and other deductions tend to greatly exceed taxable income. That means much of an MLP's cash distributions will be tax-deferred. There is one downside: You'll typically have to deal with complicated K-1 tax forms each year. But for many, the income is worth it.

Here, we will look at three MLPs currently yielding between 8% and 9%. Thanks to recent changes to the tax code, the MLP world has been shrinking threw corporate reorganizations. These three partnerships represent some of the top choices among the remaining options.

Data is as of Feb. 23. Distribution yields are calculated by annualizing the most recent distribution and dividing by the unit price.

• Market value: $51.1 billion
• Distribution yield: 8.0%

Scale and scope are a major advantage for MLPs as it pertains to finding new ways to generate cash flows, and to keeping the cash flowing. Enterprise Products Partners LP (EPD, $23.41) has these qualities in spades.

EPD is one of the largest midstream energy companies in America, boasting roughly 50,000 miles of pipelines transporting crude oil, natural gas, natural gas liquids (NGLs) and refined products. On top of that, it controls assets such as barges, coal terminals and several key shipping docks and ports along the Gulf Coast. This includes one of the only facilities approved to export ethane and other fuels to ports outside the U.S.

This size and diversification has provided EPD with relatively strong and stable cash flows, which it has used to grow its distribution for 23 consecutive years. The latest quarterly payout was a 46.5-cent distribution representing a 3.33% increase from 2021. As of the fourth quarter, EPD had a healthy DCF coverage ratio of 1.6. (Distributable cash flow, or DCF, is the amount of cash that's left over to share with unitholders after expenditures and other expenses.)

Enterprise Products Partners is working to improve its scale further, too. In January, the company bought privately held Navitas Midstream Partners for $3.25 billion in cash. EPD now has access to 1,750 miles of pipelines and cryogenic natural gas processing facilities right in the prolific Permian Basin. This gives Enterprise Products Partners a significant foothold in an area that has plenty of production upside.

"We expect the company to post strong revenue and EBITDA in any energy market environment, and to maintain a healthy balance sheet with below-industry-average leverage," say Argus Research analysts, who rate the stock at Buy. "We also expect EPD to benefit from continued recovery in gathering and processing volumes, new growth projects, and the planned acquisition of Navitas Midstream Partners."

• Market value: $9.8 billion
• Distribution yield: 9.0%

The key to Magellan Midstream Partners LP's (MMP, $46.20) long-term success has been its "oily" focus and some of the most conservative management in the business.

Magellan is a large pure-play in the transportation raw crude oil and various refined products including gasoline and jet fuel. It does so through 2,200 miles of crude-oil pipelines, as well as 9,800 miles of refined-product pipelines. Its other facilities include 81 refined-product terminals, storage facilities and a condensate splitter. Many of these are located in areas such as Cushing, Oklahoma – the "pipeline capital of the world."

The business model is fairly simple. Energy producers book time on its pipeline system to get their products to refiners and/or end users, and these refiners and end users book time on the system to get their products to market. MMP gets a check based on the volumes flowing through its pipes and sitting in its storage tanks.

While other rivals meandered more into natural gas and other energy products during boom years, MMP added more oil-focused projects to its umbrella. And during the pandemic, management ridded itself of noncore assets and bought back units.

"We continue to favor MMP's conservative financial profile, modest distribution growth and equity repurchase activity," say Stifel analysts, who rate the stock at Buy.

Magellan's main selling point is, of course, the distribution. For years, the company raised its payout every quarter – while that practice stopped during the pandemic, the company did return to hikes with a 1% improvement announced in October 2021. Its $1.0375-per-unit distribution translates into a yield of 9% – and MMP has 1.2 times the amount of DCF it needs to cover that payout.

• Market value: $1.8 billion
• Distribution yield: 8.4%

Most MLPs are set up for a distinct purpose. For instance, an energy producer might form a partnership, then place all of their gathering lines inside it to reap the tax benefits. Such is the case with Holly Energy Partners (HEP, $16.72).

HEP was formed by refiner HollyFrontier (HFC) to hold pipelines, storage terminals, and other assets that directly feed its own refineries. As such, Holly Energy effectively receives about 70% of its revenues from serving HollyFrontier and other affiliates, with the rest coming from third-party relationships. This situation has largely been great for both parties, as refineries need a constant flow of oil to crack into gasoline, diesel and jet fuel.

"Holly Energy Partners has long-benefited from a strong strategic relationship with its sponsor that is backed by substantial [minimum volume commitments], shielding it from broader macro volatility," say Raymond James analysts, who rate the stock at Outperform (equivalent of Buy).

Not that it's invincible by any means. The pandemic forced HEP to slash its distribution by 48 cents to 35 cents per unit. However, demand is rising and both companies are on better footing now; Holly Energy had about twice the distributable cash flow it needed to cover the distribution as of the start of 2022.

For those worried about the lack of diversification, HEP has continued to seek expansion efforts and reduce its reliance on its refiner parent. This has included new joint ventures with Plains All-American Pipeline (PAA) and expansion efforts along its system.

Yes, HEP remains a riskier pick than the aforementioned EPD and MMP. But it might be one of the best MLPs for bargain hunters, as it features a dirt-cheap price-to-free-cash-flow ratio of less than 8 – cheaper than our other two picks.

It's no secret that much of Wall Street is adopting a green-is-good investing mentality to combat climate change. But that doesn't mean less environmentally friendly, old-style oil and gas stocks can't speed ahead from time to time. That's just what has happened in recent months.

Thanks to supply shortages and a rise in demand for fossil fuels as the economy recovers, large-company energy stocks have gained 60% since the start of 2021. That's more than double the 27% rise in the S&P 500 and tops all other market sectors. And it comes after a disastrous 2020, when energy stocks plunged 34% – the sector's worst return in a calendar year in more than a decade.

The resurgence of old-economy energy stocks comes as U.S. oil prices skyrocket. West Texas Intermediate crude prices recently hit their highest level since 2014 and topped $85 per barrel. And natural gas prices more than doubled in the first 10 months of 2021.

In the past, these sharp price spikes have been bullish for energy stocks. Energy was the top-performing S&P 500 sector in 2007 and 2016, for instance, when WTI prices surged 58% and 45%, respectively, in those calendar years.

Many investment firms and the U.S. Energy Information Administration (EIA) are forecasting higher energy prices to persist in 2022, which bodes well for fossil fuel energy stocks, even as the world is focused on going green. We'll explain why and tell you the best way to make a strategic investment in this sector. Returns and data are through Nov. 5, unless otherwise noted.

A Suppy and Demand Mismatch

What's revving up fossil fuel prices?

For starters, bad weather and lower oil production have hurt supply. Hurricane Ida hobbled operations in the oil-rich Gulf of Mexico in late August, and snow and ice storms in early 2021 froze natural gas pipelines in Texas, which produces 25% of U.S. natural gas, the EIA says.

On top of that, OPEC, the 13-country oil cartel, has been slow to bring crude production back to pre-pandemic levels since its record cut in spring 2020 of 10 million barrels per day (roughly 10% of the global oil supply). Analysts say OPEC production won't recover to pre-COVID levels until mid-2022. Until then, scarcity should keep oil prices elevated.

The world's shift to clean energy and investors' growing preference for companies that score high on ESG (short for environmental, social and governance) measures are crimping supply, too.

Investors have pressured traditional energy companies to spend less on new oil wells and other fossil fuel projects and instead reinvest profits into buying back shares and paying bigger dividends. Oil and gas execs have been "beaten over the head by investors and ESG proponents who say, 'stop the development of fossil fuels,'" says Stewart Glickman, energy analyst at CFRA, a Wall Street research firm.

It's part of the reason why the number of active rigs drilling for oil and gas in the U.S. is down 50% from their recent peak level in late 2018, according to Baker Hughes, a company that provides oilfield services to drillers. The dearth of domestic energy production should exacerbate fossil fuel supply shortages in the coming months.

Meanwhile, demand is on the rise, thanks in part to the economic recovery. The International Energy Agency, a Paris-based organization that advises countries on energy policy, projects global oil demand to recover to pre-COVID levels by the end of 2022. Add that to short supply, and what you have is "a perfect storm" that supports higher energy prices, says Mark Haefele, chief investment officer of UBS Global Wealth Management.

A Bumpy Transition to a Net-Zero Economy

Clean energy isn't ready to take over from fossil fuels, and that's also good for oil and gas companies in the near term. Renewables currently lack the bandwidth to supply enough power when demand spikes. And clean energy is also vulnerable to weather. If the sun isn't shining or the wind isn't gusting or the rain isn't falling, the renewable-energy grid becomes less reliable and more vulnerable to intermittent outages.

What's more, the buildout of wind farms, solar infrastructure and renewable-energy storage solutions hasn't been big enough – so far – to make up for the reduced investment in fossil fuel projects.

"We lack the ability to count on renewables in the same way we can count on fossil fuels," says CFRA's Glickman. All told, these shortcomings lead to periodic energy price spikes that cause oil and gas stocks to rally.

Energy Stocks Have Plenty of Gas Left in the Tank

The long-term investing outlook favors green-friendly energy firms, but shares of oil and gas companies tend to perform well in periods, like now, when crude and natural gas prices are on the rise and demand is outstripping supply. Energy sector analysts at BofA say crude could top $100 a barrel this winter if temperatures plummet, a roughly 20% jump from current prices.

And profits are rising. In 2022, analysts expect 30.2% profit growth for energy firms year-over-year, outpacing the broad market's 7.5% increase, according to earnings tracker Refinitiv. In recent earnings calls with analysts, executives at oil services firms Halliburton (HAL) and Schlumberger (SLB) described the recovery in their businesses as a "multiyear" event.

Another plus: Energy stocks are cheap. The S&P 500 energy sector trades at 12.3 times estimated 2022 earnings, compared with a P/E of 21 for the broad market, according to S&P Dow Jones Indices. Will Riley, comanager of Guinness Atkinson Global Energy, says current prices of energy stocks don't fully reflect the earnings benefits that companies typically derive from the sharp run-up in crude and natural gas prices.

If you're thinking of adding fossil fuel companies to your portfolio, a tactical, diversified approach is best. To gain broad exposure to old-economy energy names, consider Energy Select Sector SPDR ETF (XLE, price $58, expense ratio 0.12%), which owns oil giants such as Exxon Mobil (XOM), as well as companies with gas and oil reserves, such as EOG Resources (EOG) and Pioneer Natural Resources (PXD), and oil services firm Schlumberger. Over the past 12 months, Energy Select Sector SPDR ETF has returned 106%.

The biggest beneficiaries of rising energy prices are the companies that "own the oil and gas under the ground and sell it when it comes to the surface," says CFRA's Glickman. That makes iShares U.S. Oil & Gas Exploration & Production ETF (IEO, $66, 0.42%) and First Trust Natural Gas ETF (FCG, $19, 0.61%) attractive now. Both funds track a broad index of shares in companies that generate the bulk of their revenues from oil and natural gas, such as ConocoPhillips (COP), EOG Resources and Occidental Petroleum (OXY). The iShares fund has gained 159% over the past 12 months; the First Trust Natural Gas ETF is up 214%.

And don't rule out fossil fuel com­panies that are taking meaningful steps to reduce harmful emissions. BofA highlights stocks with this kind of upside, including Chevron (CVX), Devon Energy (DVN) and ConocoPhillips.

Finally, we're not turning our backs on renewable energy. We view this area of the energy sector as a solid long-term, albeit volatile, investment. Consider SPDR Kensho Clean Power ETF (CNRG, $110, 0.45%) and Invesco WilderHill Clean Energy ETF (PBW, $92, 0.61%), which is a member of the Kiplinger ETF 20 list of our favorites.

Oil stocks have been pretty slick in 2021, rising sharply in anticipation of a massive recovery in global economic activity as the COVID-19 pandemic fades.

Indeed, oil stocks have been one of the strongest recovery plays to be found – and analysts say the sector has plenty of room left to run.

The Dow Jones U.S. Oil & Gas Index, which measures the performance of nearly three dozen stocks across the industry, was up 27% for the year-to-date through April 19. That compares to a gain of just 10.8% for the broad-market S&P 500, and a rise of 11.3% for the blue-chip Dow Jones Industrial Average.

Of course, not all oil stocks are created equal, and the sector still faces plenty of headwinds. The economic recovery could stumble, for one thing. And even if it doesn't, recovery-chasing increases in production are forecast to limit upside in crude oil prices from current levels.

Despite those challenges, Wall Street is decidedly bullish on oil stocks in general, and really has the hots for a short list of names in particular.

To find analysts' favorite oil stocks to buy now, we screened the Russell 3000 for oil stocks with the highest analyst recommendations, per data from S&P Global Market Intelligence.

Here's how the recommendation system works. S&P Global Market Intelligence surveys analysts' stock recommendations and scores them on a five-point scale, where 1.0 equals a Strong Buy and 5.0 is a Strong Sell. Any score between 2.5 and 1.5 equals a Buy recommendation. Scores below 1.5 equate to recommendations of Strong Buy.

After limiting ourselves to oil stocks with only the highest conviction Buy or Strong Buy consensus recommendations, we dug into research, fundamental factors and analysts' estimates to suss out the best oil stocks to buy.

With that, have a look at analysts' absolute favorite oil stocks to buy now.

Share prices are as of April 19, unless otherwise noted. Analysts' consensus recommendations and other data are courtesy of S&P Global Market Intelligence. Stocks are listed by strength of analysts' consensus recommendation, from lowest to highest.

• Market value: $34.1 billion
• Dividend yield: 4.6%
• Analysts' average rating: 1.72 (Buy)

Analysts are increasingly bullish on oil stocks in the refinery sector as we approach summer, and one of the players they like best is Phillips 66 (PSX, $77.94).

The independent oil refiner gets a solid consensus Buy recommendation on Wall Street. Sweetening the deal, this oil stock sports a generous dividend yield to boot.

"Overall, we still see PSX as a best in class, diversified business model with a secure balance sheet that has weathered the storm," writes Raymond James analyst Justin Jenkins, who rates the stock at Outperform (the equivalent of Buy). "We still view PSX as a long-term core holding in energy. PSX's business should justify a premium valuation relative to the group."

PSX is widely considered among the pros to be one of the best oil stocks to buy now. Of the 19 analysts covering Phillips 66 tracked by S&P Global Market Intelligence, eight rate it at Strong Buy, seven say Buy and three have it at Hold. One has no opinion on shares in the oil stock.

The Street expects the company to generate average annual earnings per share (EPS) growth of 7.8% over the next three to five years. Given that outlook, PSX's valuation – trading at 11.7 times estimated earnings for 2022 – appears eminently reasonable.

With an average target price of $91.71, analysts give the oil stock implied upside of about 18% over the next year or so.

• Market value: $14.8 billion
• Dividend yield: 2.9%
• Analysts' average rating: 1.63 (Buy)

One way Devon Energy (DVN, $22.03) differentiates itself from other oil stocks in the exploration and production (E&P) sector is by way of management's restraint and discipline.

"We have no intentions of adding any growth projects until demand fundamentals recover, inventory overhangs clear up, and OPEC plus curtailed volumes are effectively absorbed by the world markets," said Devon CEO Rick Muncrief on a conference call with analysts in February.

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Indeed, DVN has hunkered down through sales and divestitures to concentrate on just a handful of oil-rich U.S. basins. Devon's $12 billion all-stock merger with WPX Energy, which closed in January, furthered its goal of strategic focus and cost control.

Those moves and others have made Devon one of the most popular names in the industry with analysts.

"Devon has a highly productive portfolio of top-tier assets, mostly located in shale-rich basins with relatively low extraction costs," writes Argus Research analyst William Selesky, who rates DVN at Buy. "This provides the company with a competitive advantage, especially with oil prices above $50 per barrel."

Seventeen analysts covering DVN tracked by S&P Global Market Intelligence call it one of the best oil stocks to buy now, at Strong Buy. Another 10 say Buy, and five call Devon a Hold. They expect the firm to deliver average annual EPS growth of 6% over the next three to five years. Meanwhile, shares trade at just 8.9 times their 2022 earnings estimate.

With an average price target of $30.35, the Street gives this oil stock implied upside of about 38% in the next 12 months or so.

• Market value: $32.2 billion
• Dividend yield: 1.5%
• Analysts' average rating: 1.62 (Buy)

Pioneer Natural Resources (PXD, $148.58) is another one of analysts' favorite oil stocks in the independent E&P sector.

The most recent boost to the bull case came in early April when Pioneer announced the acquisition of privately held Doublepoint Energy for $5.5 billion in cash and stock, along with the assumption of $900 million in debt.

Analysts note that the deal enhances PXD's position in the Midland Basin, which has some of the strongest well economics in the greater Permian Basin.

"PXD is building a powerhouse of a Permian Basin play, with no federal land exposure," writes CFRA Research analyst Stewart Glickman, who rates shares at Buy. "We are somewhat surprised by the timing of this deal, coming so soon after closing the Parsley acquisition [in January], but we think PXD is being opportunistic."

CFRA's Glickman is very much in the majority when it comes to his stance on the oil stock. Of the 34 analysts covering PXD tracked by S&P Global Market Intelligence, 19 rate it at Strong Buy, nine say Buy and six have it at Hold. Their average target price of $192.81 gives shares implied upside of about 30% over the next 12 months or so.

Like a number of oil stocks on this list, cautious sentiment appears to have kept PXD's valuation in check. The Street projects the firm to generate average annual EPS growth of 8% over the next three to five years, and yet shares change hands at less than 11 times estimated earnings for 2022.

• Market value: $14.0 billion
• Dividend yield: 2.0%
• Analysts' average rating: 1.58 (Buy)

Some recent dealmaking, a diversified business and comparatively low cost of supply has the Street stampeding into the bull camp for Diamondback Energy (FANG, $77.67).

As investors in oil stocks know all too well, the industry underwent an intense period of consolidation amid the pandemic-driven rout in energy prices. And FANG has been among the more active acquirers.

In the past few months, Diamondback closed a $2.2 billion deal for QEP Resources and acquired assets of privately held Guidon Energy for nearly $1 billion.

The moves were met with approval by analysts who cover oil stocks.

"Diamondback Energy is well-positioned to outperform in a volatile commodity environment based on its strong cash margins, defensive attributes and synergies associated with the recent acquisitions of QEP and Guidon," writes Stifel equity research analyst Derrick Whitfield, who rates shares at Buy.

"The company's relatively low cost of supply, balance sheet, minerals and midstream ownership are a few of the reasons it is well-positioned to outperform as activity returns," Whitfield adds.

On the whole, the pros see Diamondback as one of the best oil stocks you can buy now. Of the 33 analysts covering FANG tracked by S&P Global Market Intelligence, 20 rate it at Strong Buy, seven say Buy and six have it at Hold. Their average target price of $94.19 gives this oil stock implied upside of about 21% over the next year or so.

As for valuation, FANG changes hands at 7.9 times analysts' 2022 earnings estimate. They expect the company to deliver average annual EPS growth of 3% over the next three to five years, per S&P Global Market Intelligence.

• Market value: $68.8 billion
• Dividend yield: 3.4%
• Analysts' average rating: 1.50 (Strong Buy)

If it isn't clear by now, the Street believes many of the best oil stocks to buy now are in the E&P industry, and few are more popular than ConocoPhillips (COP, $50.89). Indeed, COP, with a rating of 1.50, is the first of our oil stocks to get a consensus recommendation of Strong Buy.

The January completion of ConocoPhillips' purchase of rival Concho Resources for $9.7 billion added to Wall Street's ardor.

"We also have a favorable view of Conoco's recent acquisition of Concho Resources, which will provide an attractive portfolio of low-cost assets and expand the company's resource base by more than 50%," writes Argus Research's Selesky, who rates the stock at Buy.

It also helps that COP, the world's largest independent E&P company, is well-suited to grapple with a prolonged period of flattish prices. Although benchmark U.S. crude oil prices are up about 32% for the year-to-date, Kiplinger's Economic Outlook doesn't expect them to move much from current levels.

"In this challenging energy environment, we believe that a company's balance sheet strength and place on the cost curve are critical, and favor those E&P companies that are well positioned to manage a potentially long period of low oil prices," Selesky writes in a note to clients. "COP is one of these companies, as it benefits from its size, scale and combination of major long-cycle and unconventional short-cycle projects."

Of the 29 analysts covering the stock tracked by S&P Global Market Intelligence, 16 say it's a Strong Buy, 10 say Buy and two have it at Hold. One analyst has no opinion. They also see a strong year ahead for COP's shares. Their $65.10 average price target implies 28% upside in the next 12 months.

Shares trades at 14.9 times estimated earnings for 2022. However, that's not exactly a screaming buy in light of analysts' 6% long-term EPS growth forecast.

• Market value: $3.5 billion
• Dividend yield: N/A
• Analysts' average rating: 1.31 (Strong Buy)

PDC Energy (PDCE, $35.42) is the second of our independent E&P oil stocks to score a Strong Buy consensus recommendation from Wall Street analysts. S&P Global Market Intelligence counts 12 Strong Buy calls, three Buys and one Hold rating on the stock.

Analysts like this small-cap's base of assets and its ability to punch well above its weight in generating free cash flow (FCF).

"In our view, PDCE offers investors a compelling asset mix between the Delaware Basin and Niobrara Shale in the DJ Basin with a resilient asset base and a top-tier balance sheet," writes Stifel analyst Michael Scialla, who rates the stock at Buy.

Goldman Sachs analyst Neil Mehta recommended that clients buy PDCE during the March pullback thanks to his expectation that the firm will produce $1.1 billion in free cash flow over the next two years. Note well that $1.1 billion in FCF would represent almost a third of PDCE's entire market value.

Lastly, the Street applauds the company's debt-reduction efforts and its intention to return $120 million in cash to shareholders through a stock repurchase plan and a new dividend program set to launch later this year.

Analysts' average target price of $47.00 gives PDCE implied upside of about 33% over the next year or so. And even after a hot start to 2021, shares still look compellingly valued.

PDCE trades at just 7.7 times estimated earnings for 2022 – even as analysts project average annual EPS growth of 7% over the next three to five years.

• Market value: $1.4 billion
• Dividend yield: N/A
• Analysts' average rating: 1.29 (Strong Buy)

Whiting Petroleum (WLL, $36.65) is by far the smallest among the seven best oil stocks to buy now, but it also easily sports the strongest Strong Buy consensus recommendation.

Keep in mind, however, that as a small-cap play, WLL doesn't get nearly as much attention from analysts as the other oil stocks on this list. That can skew the ratings.

Indeed, S&P Global Market Intelligence tracks only eight analysts who cover the independent E&P company. Six of them call WLL stock a Strong Buy, one says Hold and one has no opinion.

It's also worth noting that Whiting was the first major oil-and-gas company to file for bankruptcy during the pandemic. The company entered restructuring on April 1, 2020, and emerged from bankruptcy protection in September.

That said, Whiting's Chapter 11 period was a salubrious experience. The company, under the direction of new CEO Lynn Peterson and a new CFO James Henderson, labors under a manageable long-term debt load of $360 million (down from $2.8 billion pre-bankruptcy) and has access to a $750 million reserve-based revolving credit facility.

The bottom line is that the Street is increasingly optimistic about WLL's bottom line.

"Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising," notes Zacks Equity Research, which rates shares at Strong Buy. "We expect an above-average return from the stock in the next few months."

With an average target price of $41.57, analysts give WLL implied upside of about 13% in the next 12 months or so. Shares trade at 8.2 times analysts' estimated earnings for 2022, according to S&P Global Market Intelligence. The Street's projected long-term EPS growth rate stands at 19% over the next three to five years.

Listen Now:

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Links and resources mentioned in this episode:

• Tax Day 2021: When's the Last Day to File Taxes?
• Most U.S. Taxpayers Don’t Know How Effects Of Pandemic Will Impact Their Taxes: Five Tax Myths Debunked
• Profit With These 7 Planet-Friendly Companies
• Earth-First Funds Are Soaring
• How Green Are Your Bonds?

Transcript

David Muhlbaum: Stock and fund investing meant to also help the environment is nothing new, but boy, has it been a hot sector this past year. In a market full of huge gains, how should you go green now? Executive editor Anne Kates Smith joins us with some stock and fund picks. Also, in a topsy-turvy 2021, Earth Day comes before Tax Day. We'll explain. That's all coming up on this episode of Your Money's Worth. Stick around.

David Muhlbaum: Welcome to Your Money's Worth. I'm kiplinger.com senior editor David Muhlbaum, joined by my co-host, senior editor Sandy Block. How are you doing, Sandy?

Sandy Block: I'm doing good, David.

David Muhlbaum: Good. This podcast is going to drop just a few days before April 15th. And you know what that is, right?

Sandy Block: I know what it's not. It's not Tax Day.

David Muhlbaum: That's right, Sandy. It's not Tax Day. Yeah, of course, April 15th is traditionally the day when we're all supposed to have filed our prior year's taxes or filed for an extension, and traditionally we'd be telling you all sorts of smart moves to make if you're a tax procrastinator, but this year, we're not, not because we don't want to be helpful, but because this year, April 15th is not Tax Day.

Sandy Block: No, this year, basically because of the COVID-19 pandemic, the deadline has been extended to May 17, 2020. So you get an extra month. And that's not just to file your taxes, but also important things like contributing to an individual retirement account or collecting a refund from three years back.

David Muhlbaum: Enjoy your month, I guess. Maybe you knew, maybe you didn't. We got a study across the transom from NORC at the University of Chicago, a research outfit, about what Americans do know about their taxes and it was, well, not reassuring. We got some work to do, you and me, Sandy.

Sandy Block: Well, yeah. But our audience, they know stuff.

David Muhlbaum: Well, let us hope so. But they might know some people who don't know as much.

Sandy Block: Right. So go ahead, tell me the bad news, I'll try not to be smug.

David Muhlbaum: Okay. So the survey was framed as a pop quiz. Five questions about tax myths. Can't do all five for reasons of time, but I'll ask you one. No, I'll do two. I'm going to do the one most people got wrong, and the one most people got right. The first question: People don't have to pay taxes if they didn't earn any income?

Sandy Block: If they didn't earn any income? That's wrong. There are plenty of forms of unearned income, interest, dividends, alimony, lottery winnings. But I only have to change one word to change the answer. If you didn't have any income, you don't have to pay any taxes.

David Muhlbaum: If you didn't have any income.

Sandy Block: If you didn't have any income, you don't have to pay taxes. And this is skipping right over the earned income tax credit, which is really complicated.

David Muhlbaum: Which is a credit, so it comes after your tax obligation, but well, we're getting in the weeds.

Sandy Block: As we do. So that was the question most people got right or wrong?

David Muhlbaum: That was the question most people got wrong. Fewer than a third of people got that one right.

Sandy Block: I'd say that's a reflection of the fact that not a lot of Americans have unearned income. You work a job, you get a W-2 or a 1099 form, there's your earnings. Okay, but what was the question that most people did well on?

David Muhlbaum: That question was: There are no taxes on side-hustle income?

Sandy Block: Oh, we just did side hustles on this podcast. Taxable, of course.

David Muhlbaum: Yeah. Right. And the respondents got that too. In fact, over 3/4 of respondents got it right. But overall, on the five questions in total, just one in 20 U.S. taxpayers, 5%, answered all five questions correctly. On average, respondents answered fewer than three questions correctly. The precise score was 2.89 out of five.

Sandy Block: Well, search kiplinger.com/taxes with your extra month of time. Not for you, of course, but for your friend who really needs help.

David Muhlbaum: Of course.

David Muhlbaum: When we return: Green investing, it's hot. What's really green and what's someone who wants to get into this sector, with such nosebleed prices, supposed to do now?

David Muhlbaum: Welcome back to Your Money's Worth. Executive editor Anne Smith is joining us today to discuss the cover story, stories actually, from Kiplinger's personal finance on green investing. Because, you know, Earth Day.

Sandy Block: Earth Day is every day.

David Muhlbaum: And every day is Earth Day, true, but it's also April 22nd this year and every year and that's just around the corner. So, welcome Anne, as we enjoy a beautiful spring day here, one of those days that makes you think, Hey, maybe everything really is okay in the world and the climate, et cetera, when it isn't. Just read another grim headline from The Washington Post on a new record for carbon dioxide levels, as measured at the Mauna Loa Observatory in Hawaii. Last year's global temperature tied for the hottest on record with 2016. But speaking of heat, we appreciate that climate change is a hot-button issue that not everyone agrees on, we're not here to debate that today. Rather, as Anne can tell us in more detail, investors are very eager to invest in stocks, funds, and bonds that claim to combat climate change, improve sustainability and other environmental goals. You know, follow the money. We are hoping that in our Kiplinger way, to give you guidance on doing that in a way that's most profitable. Wow. Okay Anne, hi, thanks for joining us. Please excuse my lengthy preamble.

Anne Kates Smith: Happy to be here. It used to be, we've been writing about green investing for as long as I've been working at Kiplinger, which I'm not even going to go into it. It used to be that if you wanted to put your money where your beliefs were, when it came to investing in ESG stocks, and ESG stands for Environmental, Social, Corporate Governance values, then you had very few choices and you probably were going to sacrifice some returns. And so the investing philosophy back in the day was, make as much money as you can in the stock market and use those profits to support whatever causes you feel like supporting.

David Muhlbaum: Like write a check, make a charitable donation?

Anne Kates Smith: Exactly. With the money that you make. But these days the choices are more than plentiful, and you definitely don't have to sacrifice returns. ESG investing has not just gone mainstream, it's pretty much taken over. Even in 2020 when people were fleeing the stock market and more money flowed out of U.S. stock funds than went into them, that was not the case with sustainable funds. And those are not just climate funds, sustainable is another word for ESG. So it includes those social and corporate aspects as well, but they are popular investments and some of them are up, two, three, four, six fold. So, no more sacrifice.

Sandy Block: So Anne, thanks for explaining the acronym ESG. And as you pointed out, it covers a variety of investing goals. But the focus of this round of Kiplinger's coverage was on the E, the environment. How come?

Anne Kates Smith: Well, because of Earth Day. We have done a lot of stories in the past year on other aspects of ESG, companies that are great to work for, for instance, and other stories. But this time we wanted to focus on the environmental aspect. Again, this is where the money is flowing. BlackRock, the huge investing giant recently did a survey and they found out that climate related risks are at the top of mind for investors who are investing in ESG funds. In other words, the E is top of mind in the ESG world. And the funds are, like I said, are just raking in money, $50 billion in 2020 into sustainable funds. There have been records set for three or four of the past years and that's double the record set in 2019. And it's 24% of inflows into all U.S. stock and bond funds last year. So, it's just raining money on these ESG funds.

David Muhlbaum: So it's white-hot. I imagine that presents hazards of its own, particularly for people who want to get in now. Like the market broadly speaking has been hitting new highs this year and a lot of those gains are concentrated in green stocks.

Anne Kates Smith: They have been. So, for instance, when we wrote about green stocks in 2020, our theme was that these stocks are going mainstream, that they're being picked up widely by investors. And, in fact, the six stocks that we recommended in that 2020 story are up about 80% on average, just looking at my list here. We had one stock, TPI Composites, that makes the blades for wind turbines. So it was up 176%. Our worst performer was Waste Management. And even that was up more than 8%. And just for comparison, the S&P over that time period was up about 27%. So, the stocks have done very well.

David Muhlbaum: So if you listened to us last year, you could have done well too?

Anne Kates Smith: Definitely. Yes.

David Muhlbaum: Let's gloat a little! It's nice to be right. It doesn't always happen.

Anne Kates Smith: It was easy to be right in that sector, but that made it a little bit more difficult this time around in 2021, when we wanted to write about green stocks with such a big run-up. We've gone well past mainstream with this investing, we had to examine whether or not the stocks were in a bubble and overvalued and ready for a pullback. For instance, I mentioned TPI Composites, that's a great company with a great future, but it's trading at nearly 70 times earnings still. So we're not recommending it for new investors. This year you have to balance your green exposure while also managing risk. This year we focused on, as much as we can say, value-priced plays. They may not be value price plays in the conventional sense, but they're not as high flying as some of the other green stocks. We looked at green chips for the long haul, companies that you can buy and hold, and some indirect plays to the climate and the whole green sector.

Sandy Block: So, Anne, you mentioned green chips, and maybe we could start by explaining what those are. Sort of the, I guess, environmental version of blue chip stocks?

Anne Kates Smith: Exactly. They're the cream of the crop, they're well-managed companies with sizable market shares. They're considered market leaders in their industries. And the two green stocks on our list this year are NextEra Energy, a big utility and Xylem, which is a water treatment company. NextEra is based in Florida, traces its roots back to Florida Power and Light. So it's still part stodgy electric utility. It's got a secure dividend, yielding about 2%, but it also has a clean energy arm with a sizable and growing portfolio, wind, solar, and battery storage projects. NextEra, says it believes it can construct 23 to 30 gigawatts of new renewable energy projects through 2024. To give you an idea of the growth rate here, that's one and a half times the size of its entire portfolio at the end of 2019.

David Muhlbaum: Okay. That's growth.

Anne Kates Smith: That's growth. Xylem is about water, not energy per se, but that's got an obvious green connection. It uses innovative methods to upgrade water infrastructure, delivering clean water to people in about 150 companies, so it's got a global reach. Xylem has digital data-driven approaches to water usage. You think about smart meters and sensors that detect pipe leaks, for example, and it serves industrial firms, utilities, municipalities, and homeowners, helping them to conserve and manage water. Xylem technology also helps to reduce the amount of, and excuse this corporate speak here, non-revenue water. That's a term for the 30 to 40% of water worldwide that's lost due to leaks, unauthorized use and just basic inefficiencies.

David Muhlbaum: Yeah. It's like the water that gets wasted before we have the chance to waste it.

Anne Kates Smith: Correct.

Sandy Block: It's like the water in my basement, right? It's non-revenue water.

Anne Kates Smith: No.

David Muhlbaum: That's expensive water. That's going to cost you, Sandy.

Anne Kates Smith: Yeah. That's very expensive water. Xylem also has treatment technologies to remove harmful pollutants from water and wastewater. So it pretty much spans the gamut in a water treatment technology.

David Muhlbaum: Water is life. I think that's someone else's tagline. Jeopardy question, who knows why it's called Xylem?

Sandy Block: No idea.

David Muhlbaum: Xylem is the part in plant tissue that moves water through the plant. Up or down kind of depending on the season.

Anne Kates Smith: Wow, back to my botany 101 days.

David Muhlbaum: Yeah. So, well, it's green. Back to the stocks. I noticed that your 2021 list has a major electric car maker on it, but its name does not start with T.

Anne Kates Smith: That's right. I told you we were taking a value approach. The car maker in question is General Motors, not Tesla. I don't want to get sidetracked into a discussion of Tesla's value or it's ever moving price targets or any of that, but I don't think I'd get a ton of argument if I were to call it a high flyer. I think the P/E ratio for Tesla doesn't even measure on our scale. GM isn't as sexy as Tesla, maybe, but it's a big player with a huge commitment to the EV market. It's up nearly 50% so far this year. Tesla's down about two over the same period, and for context, the S&P is up about nine. Over the past 12 months, full year, GM is up nearly 220%.

Sandy Block: Oh wow.

Anne Kates Smith: Yeah, not shabby, not as much as Tesla, up about six fold, but not shabby. And I can tell you, the chart is a lot smoother. And GM sells for about 12 times expected earnings.

David Muhlbaum: I know we're talking stocks, not cars, but I just have to interject that I saw some video of GM's new electric truck, the Hummer EV SUV, and that thing is just nuts. It's not just that it's electric, it's how being electric enhances its off-roading capabilities. The thing can crab sideways. I can't tell you that the production Hummer, which is expected to be out next year will be any good, but I can tell you that GM certainly seems capable of generating buzz. Anyway Anne, I'd like to pivot from stocks in part because people can see the other ones we're recommending for 2021 in the story, Profit From Planet Friendly Companies, which we will link to in the show notes, and in part because a whole lot of the activity in ESG investing is in funds. In fact, that's kind of where the whole concept got its start. And in the April forecast, the cover stories, you've got a bunch of ETFs, a handful of bond funds, and one mutual fund that invests in stocks. And all of these are green.?

Anne Kates Smith: Yeah, there are very few pure green plays in the fund world. Most of these funds pay attention to other so-called sustainable investing principles as well. And we're talking about the social values and corporate governance practices that make up the second two letters in ESG. But we chose these funds for their focus on the E or the environmental component of ESG.

Sandy Block: Okay. Can I ask for an explainer then? Because, when we talk about individual companies and stocks, we can make our own assessment of whether a company is doing something green, significant. Some are self-evident, like a company that makes wind turbine blades. Others you got to think about, like General Motors and see what the long-term objectives are. But for funds, who says, "Yeah, this fund is green."?

Anne Kates Smith: And that's a whole other can of worms. There are a host of raters, more coming in every day, each with their own metrics. And one of them that we refer to a lot is the ginormous investment research firm Morningstar. With Morningstar, a low ESG score is better. It's a dynamic area. There are some controversies. Some companies can be accused of greenwashing, for instance, making some of their practices look greener than they actually are. But with funds, here's the deal, you can look at how a fund identifies itself and read the prospectus, see what they consider green and see what they demand as part of their investment criteria before they invest in a stock.

David Muhlbaum: Yeah. I just read an article we posted in our Building Wealth Channel by a financial advisor named Peter Krull, about the distinctions between socially responsible investing -- SRI -- and ESG -- environmental, social, and governance investing, the term we've been using. In short, he says, don't use those interchangeably. We could probably do a whole podcast on that alone, maybe. But I bring that up kind of to say that, we're aware of these issues and there are differing opinions on what's green or green enough, but... Anne, to put us back on track, give us a high level look at how ESG funds are faring. We did talk about inflows.

Anne Kates Smith: Yeah. And I'll just say one more thing about the labels. And this is particularly true in the green bond investing area. There are many, many labels, each with its own set of metrics and criteria. If you limit yourself to the investments that fall within those labels, then you are limiting your universe of investments. So it is a subjective area, and it helps if you do your own homework and keep an open mind. But back to the funds, they are very hot, funds that you invest with environmental concerns in mind have just sizzled. Some have posted triple-digit returns over the past 12 months. And like we've mentioned, investors have just poured money into these funds. The $50 billion that went in in 2020 is more than double the record set in 2019. And it's about 24% of overall inflows into U.S. stock funds for the year.

Sandy Block: Wow. I mean, that's incredible.

Anne Kates Smith: Yeah. Sustainable investing hasn't just arrived, it's taken over. And you can particularly see that in 2020, because U.S. stock investors pulled money out of funds or, investors pulled money out of U.S. stock funds, let me put it that way. But inflows into sustainable funds, ESG funds were positive. So I think that says a lot about how people are consistent investors when they're putting their money where their values are. Also, one other fact, four of the top 10 sustainable funds with the biggest inflows in 2020 were focused on renewable energy. So, particularly hot there. When we talked to Jon Hale, who's the head of sustainability research at Morningstar, he characterized some of the excitement in this area as performance chasing. But you have to put that in perspective, the commitment to green energy from the Biden administration and the future there over the long haul means that the potential is still there.

Sandy Block: And speaking of performance chasing, maybe one of your fund choices, Invesco WilderHill Clean Energy, certainly looks like it's doing very, very well. You could argue that investing in that was going after performance.

Anne Kates Smith: Well, to put it in context, that fund is up about 273% over the past 12 months. So a lot of performance to chase there, but we had already added that fund to the Kiplinger ETF 20, which is the list of our favorite ETFs last year. So, that tracks an index of companies that focuses on green and renewable energy sources like wind, solar, hydro, geothermal, biofuel. It also looks at companies involved in energy storage, clean energy, conversion. Some of these stocks are up over a 1000% in the past year, but we have to warn our readers and listeners that volatility works both ways. The ride in this fund can be a little bit bumpy, and to be honest, it's down about 4% so far this year. Still has that 272.97% gain for the past 12 months. But you have to be prepared for a little bit of volatility.

Sandy Block: Okay. So I'm green, but I don't like volatility. Can you recommend something that maybe is a little calmer for my portfolio?

Anne Kates Smith: Well, there are different things you can do to ameliorate some of those concerns. Like we mentioned, the ETF that's equal weighted, that means that some of the highest-priced stocks, that can be the most volatile and risky, don't dominate the returns. But there's another one, the one mutual fund that we recommended, Fidelity Select Environment and Alternative Energy Portfolio. That's a mouthful. The symbol there is FSLEX. The fund is a diversified approach to companies tackling climate change. It holds stocks in every sector, for instance.

Anne Kates Smith: Mostly companies that get about one quarter of their revenue tied to a smorgasbord of environmentally friendly pursuits. And that means fuel efficiency, generating renewable energy, building water infrastructure, recycling, stuff like that. That means that it holds a handful of big, traditional blue chips. One of them is Honeywell, the giant industrial conglomerate. And it's got Honeywell because that company works with building owners to install more energy efficient systems. 3M is another big conglomerate that's in there. 3M is a huge supplier to solar and wind companies. The fund has lagged the S&P over the past three years, but it's beaten the S&P year-to-date and over the past 12 months and it's neck and neck over the past five years.

David Muhlbaum: Okay. So here I go, talking about my family again, but my younger daughter wants to invest some of the money she saved up from babysitting, gifts and the like, in a green fund. She's off at school in Vermont right now where they go to class and run an organic farm, so it's all very on-brand, if you know what I mean. So I started looking at some of these funds and my God... I keep seeing Tesla as a holding! Like, for that one we were just talking about, Fidelity Select Environment and Alternative Energy Portfolio, it's number one. They literally have twice as much Tesla as Honeywell. I mean, I imagine a part of this is with the way Tesla shares have been rising, it's going to get up there in fund holdings. But it's not exactly reassuring to see this hot potato of a stock keep popping up. To me that is, I don't think my daughter cares. Her concern is finding a fund that has a manageable minimum investment.

Anne Kates Smith: Well, I'll tell you, it's not uncommon to find Tesla in a green fund, but I just have to say, it's by far and away not the only overvalued green stock out there. Tesla has its supporters. It's a company for the long haul, they say. But here's the thing about mutual funds, David, if you hire a pro to manage your green investments, part of the privilege and the benefit of that is leaving those decisions to the fund manager. Now, if you're uncomfortable with that kind of volatility and that kind of risk, you can check the holdings. Mutual funds disclose their holdings periodically, most ETFs do so daily, but you also use some other criteria to choose a fund. You compare expenses, you try to buy a low-expense fund for instance, that's extremely important, and you buy a track record. You don't have to second guess the manager, that's the beauty of buying a fund until such time as that fund no longer suits your needs or the track record crumbles.

David Muhlbaum: It's interesting you mentioned those important parameters in choosing a fund. In the process of trying to advise my daughter, I found myself very much going through those parameters and reminding myself again, why those matter and how we go about picking mutual funds, and it was an interesting opportunity to riff on what I hope I've learned over the years, and that you helped teach us all. There are four other funds in Earth-First Funds Are Soaring that we didn't get to today. I'm going to put a link into that article as well. And as long as we're talking about things that we didn't have time for, we briefly mentioned bond funds, but we don't have time to really dig into that today, but there are green bond funds as well. And again, I'll put a link to that article as well so you can just keep on digging into all the green content that we have put together for Earth Day. Anne, thank you very much for joining us today. We appreciate your insights.

Anne Kates Smith: Oh, it's my pleasure. Happy Earth Day.

Sandy Block: You too.

David Muhlbaum: And that will just about do it for this episode of Your Money's Worth. If you like what you heard, please sign up for more at Apple Podcasts or wherever you get your content. When you do, please give us a rating and a review. If you've already subscribed, thanks. Please go back and add a rating or a review if you haven't already, it matters. To see the links we've mentioned in our show, along with other great Kiplinger content on the topics we've discussed, go to kiplinger.com/podcast. The episodes, transcripts, and links are all in there by date. And if you're still here because you wanted to give us a piece of your mind, you can stay connected with us on Twitter, Facebook, Instagram, or by emailing us directly at podcast@kiplinger.com. Thanks for listening.

Dow Jones stocks won't always keep up in a rising market, but you can't beat them when it comes to stability and defense in a down market.

Case in point: the benchmark S&P 500 is up 22% on a price basis since over past 52 weeks, while the "growthier" but riskier tech-heavy Nasdaq Composite has added more than 30%.

Meanwhile, the Dow Jones Industrial Average, that elite list of 30 more mature industry leaders, rose less than 18% over the same span.

You can blame the Magnificent 7 stocks for much of the Dow's lagging ways in the bull market. Of the mega-cap tech names driving so much of the bull market's returns, only Microsoft (MSFT), Apple (AAPL), Amazon.com (AMZN) and Nvidia (NVDA) can be found in the blue-chip average.

The fact that the Dow is weighted by price rather than market cap limits the Mag 7's contributions on the way up, but then it also helps limit any damage on their way down.

That sort of underperformance hurts, but remember that stocks don't always go up. Take 2026, for example. When the market swooned in March, the Nasdaq was off nearly 11% for the year to date at one point, while the S&P 500 shed more than 7%. The more resilient Dow lost 6% at its year-to-date nadir.

That's generally what the Dow is supposed to do. Half of the average's components are low-beta stocks. That means they tend to lag in up markets, but hold up better when everything is selling off.

This low-beta influence can have advantages for long-term investors. After all, as bright a time as it's been for equity investors over the past several years, downside risks very much remain.

A new international trade regime had already injected uncertainty into markets – and that was before the war with Iran threatened to upend the global economy.

Although fears of an economic slowdown are receding, worries about an AI-fueled bubble are rising. BofA Securities recently cut its year-end price target on the S&P 500 to 7,100. That gives the index implied downside from current levels.

Savita Subramanian, head of U.S. equity and quantitative strategy, noted that seven out of 10 of BofA's bear market indicators have now been triggered – a signal that historically matches levels seen right before market peaks.

Should such a change in market fortunes come to pass ... well, that's where Dow Jones stocks come in.

Dow Jones stocks ranked

This collection of industry-leading companies and dividend growth stalwarts with their fortress-like balance sheets can offer relative stability in tempestuous market times.

From the best Dow dividend stocks to the most widely held blue chip stocks, components of the industrial average occupy top spots in the portfolios of hedge funds and billionaire investors.

Warren Buffett's Berkshire Hathaway (BRK.B), in particular, is a huge fan of select Dow stocks.

To get a sense of which Dow Jones stocks Wall Street recommends at an increasingly uncertain time for equities, we screened the DJIA by analysts' consensus recommendations, from worst to first, using data from S&P Global Market Intelligence.

Here's how the ratings system works: S&P surveys analysts' stock calls and scores them on a five-point scale, where 1.0 equals a Strong Buy and 5.0 is a Strong Sell. Scores between 3.5 and 2.5 translate into Hold recommendations.

Scores higher than 3.5 equate to Sell ratings, while scores equal to or below 2.5 mean that analysts, on average, rate shares at Buy. The closer a score gets to 1.0, the higher conviction the Buy recommendation.

In other words, lower scores are better than higher scores.

See the table below for analysts' consensus recommendations on all 30 Dow Jones stocks, per S&P Global Market Intelligence, as of June 9, 2026.

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Forget the Dow. Forget the S&P 500. If you're looking for the major index with the most pep in its performance step, look to the Nasdaq-100 – and the growing number of Nasdaq-100 ETFs and mutual funds that allow you to enjoy its fortunes.

The Dow Jones Industrial Average was for decades America's premier stock index, the favored proxy of domestic industry.

Over time, the Dow was eclipsed by the S&P 500 Index. By virtue of tracking 500 companies versus the 30 Dow Jones stocks, the S&P could cover a wider array of firms and better represent the spectrum of U.S. business.

But, from a pure return perspective, both suffer in comparison to the tech-heavy Nasdaq-100 Index. The Nasdaq-100, introduced in 1985, is a select slice of the larger Nasdaq Composite's largest nonfinancial companies.

The index has long been dominated by the best tech stocks, with technology currently accounting for roughly 60% of its total weight.

But it also includes sizeable slugs of high-growth consumer discretionary plays, communication services stocks, and significant health care and industrials exposure too.

The Nasdaq-100 has been a monster outperformer over the long run, delivering a 464% total return (price change plus dividends) during the past decade, easily outdoing the Dow (+213%), S&P 500 (+265%) and the Nasdaq Composite (357%).

The folks over at investment management company Invesco are surely loving it. They sponsor the Invesco QQQ Trust (QQQ), which has allowed investors to take advantage of those rapid gains for decades.

The popularity of QQQ has spawned several related equal-weight, inverse and leveraged products over the years.

More recently, Invesco has leveraged QQQ's success into a number of related investment products tied to the fund (more on those in a moment).

Read on as we examine 14 of the best Nasdaq-100 ETFs and mutual funds. A few of these funds are direct plays on the index itself, while the rest offer various ways to slice, dice and even amplify the Nasdaq-100.

Data is as of July 29.

• Assets under management: $362.4 billion
• Expenses: 0.20%, or $20 annually for every $10,000 invested

Ultimately, the Nasdaq-100 Index is just a set of data. The Invesco QQQ Trust (QQQ) turned that dataset into shareholder returns.

QQQ came to life in March 1999 – unfortunate timing for its first few years, given the dot-com bubble burst shortly thereafter. But, given its total return, long-term investors aren't exactly complaining.

Between 2010 and 2013, QQQ assets had grown from $22 billion to $38 billion. Today, it's more than $360 billion under management, and QQQ has become ubiquitous. You can find it in limited-selection beginner investment apps and robo advisers, and even its options contracts are popular.

As for its innards, the QQQ ETF is a simple index fund that tracks the Nasdaq-100. Top holdings include artificial intelligence juggernaut Nvidia (NVDA) as well as familiar tech names such as Apple (AAPL) and Microsoft (MSFT).

The portfolio also includes consumer giant Amazon.com (AMZN), upstart semiconductor company Broadcom (AVGO), electric vehicle (EV) maker Tesla (TSLA) and social media conglomerate Meta Platforms (META).

It's not quite accurate to call the Nasdaq-100 a broad index because there are so many areas of the market that are quiet or downright missing in QQQ. But it's not a wholesale tech ETF, either.

It is what it is, mostly for better than for worse.

Learn more about QQQ at the Invesco provider site.

• Assets under management: $1.3 billion
• Expenses: 0.35%

Invesco might be the most well-known fund to leverage the Nasdaq-100, but Direxion offers an interesting take on the index, too.

The Direxion Nasdaq-100 Equal Weighted Index Shares (QQQE) invests in an equal-weighted version of the Nasdaq-100. Every March, June, September and December, the index is rebalanced, resetting each of its 100 stocks at 1% of assets.

Their weight will fluctuate depending on how they perform over the next three months, but once the next rebalancing occurs, they're all set back onto equal footing.

That means "bottom" Nasdaq-100 holdings like Micron Technology (MU) and Automatic Data Processing (ADP) have just as much sway as the Apples and Microsofts – and, now, the Nvidias – of the world.

The good news? There's far less single-stock risk. Consider that, with QQQ, three stocks each account for more than 7% of its performance, and there are a few more with healthy single-digit weights.

A bad stretch for any one of those stocks could cancel out the progress of several smaller-weighted constituents, thus dragging on the ETF's returns. Equal-weighting blunts this downside risk.

The bad news? Over the long term, it doesn't allow its winners to ride.

The reason the likes of Apple, Microsoft and Nvidia are overwhelming factors in the major indexes (which tend to be weighted by market capitalization) is simply because they've grown so much. This allows these indexes to increasingly benefit in their upside.

Ultimately, the choice between QQQE and QQQ comes down to what you're comfortable with from a risk perspective.

Learn more about QQQE at the Direxion provider site.

• Assets under management: $56.1 billion
• Expenses: 0.15%

While QQQ is wildly popular, it does have one small shortcoming: Compared to many other broad-market and sector index funds, its annual fees are a touch on the high side.

However, Invesco took care of that in October 2020 by launching the Invesco Nasdaq 100 ETF (QQQM). It's simply a cheaper version of QQQ. At 0.15% annually, it costs five basis points fewer than its sister fund. (A basis point = 0.01%.)

So . . . why not just make QQQ cheaper? The QQQ ETF is an extremely liquid fund that changes hands at a rate of more than 40 million shares daily. As a result, it's able to create tight bid-ask spreads.

That's ideal for traders, who aren't as concerned about low expense ratios as longer-term investors. Rather than drop the fee on QQQ, Invesco created QQQM for buy-and-hold investors who are focused on cost savings.

Invesco can't complain. In fewer than three years, QQQM soaked up more than $56 billion in assets – without kneecapping the QQQ, which continues to expand apace.

As for investors, if you want to buy the Nasdaq-100 Index and hold it, your most significant cost savings will be from the five-basis-point discount in QQQM.

Traders, however, will benefit more from entering and exiting trades with pinpoint precision, which the QQQ's trading volume offers.

Learn more about QQQM at the Invesco provider site.

• Assets under management: $7.7 billion
• Expenses: 0.42%

Before we discuss a few other Nasdaq-100 ETFs, we should point out that the index can support more than just exchange-traded funds.

It might sound funny to call a $7.7 billion mutual fund a "hidden gem." But it's not far from the truth with Victory Nasdaq-100 Index Fund (USNQX).

USNQX, which launched in October 2000, is almost as old as QQQ. But it boasts a small fraction of the ETF's assets.

And it's not for lack of performance: USNQX ranks in the top 10% of funds in its category (large growth) for every meaningful long-term time frame.

The 0.42% expense ratio is more than you'd pay for the Invesco QQQ Trust (and it's much higher than ETFs on average, for that matter).

But it's roughly half the Morningstar category average expense of 0.785%, so USNQX is at least relatively cheap. And it should be, given that this is an index fund.

As you might expect, Victory Nasdaq-100 Index Fund's holdings and breakdown are virtually identical to QQQ. They both just track the index.

Learn more about USNQX at the Victory Capital provider site.

• Assets under management: $74.3 million
• Expenses: 0.20%

The Invesco ESG Nasdaq 100 ETF (QQMG, $38.98) is another of the funds Invesco created to capitalize on QQQ's popularity. Its October 2021 launch also dovetailed with the rising popularity of environmental, social and governance (ESG) investing.

As the name suggests, this ETF invests in Nasdaq-100 stocks that also meet certain ESG criteria. Among the requirements for inclusion:

• meet an ESG Risk Rating Score threshold;
• be deemed compliant with U.N. Global Compact principles;
• meet business controversy-level requirements; and
• not be involved in certain business activities, including alcohol, cannabis, controversial weapons, gambling, military weapons, nuclear power, oil & gas and tobacco.

The ESG filters keep out fewer than 10% of QQQ's holdings – mostly energy stocks but also industrial heavyweight Honeywell (HON).

From a sector perspective, you lose a little exposure to several sectors. The portfolio is concentrated in tech, which represents 62.5% of assets vs 53.3% in QQQ.

It's not a massive difference. But if you're looking for a slightly greener version of QQQ without any oil and gas exposure, QQMG does the trick.

Learn more about QQMG at the Direxion provider site.

• Assets under management: $173.8 million
• Expenses: 0.29%

The Invesco Nasdaq 100 Index Fund (IVNQX), which was launched alongside QQQM, allows investors to track the Nasdaq-100 Index with a mutual fund.

This fund, which will provide similar coverage as QQQ and QQQM, was created to allow Invesco to reach a broader audience. Specifically, it's aimed at retirement accounts, which often can't access ETFs.

Indeed, IVNQX represents Class R6 shares, which are primarily intended for retirement plans, shareholders of omnibus intermediaries that meet certain standards, and institutional investors. In short, it's unlikely you'll be able to access IVNQX with a traditional brokerage account.

Fortunately, your traditional brokerage account will have access to QQQ and QQQM, so it's not an issue.

Learn more about IVNQX at the Invesco provider site.

Call 'em sequels, call 'em spinoffs: The next three funds aren't traditional Nasdaq-100 ETFs. But they're closely related, and they've picked up significant followings of their own. The expense ratios for the following funds range from 0.15% to 0.20%.

First to market, in October 2020, was the Invesco Nasdaq Next Gen 100 ETF (QQQJ). Think of this as the Nasdaq-100's junior varsity squad. While QQQ ETF tracks the 100 largest Nasdaq non-financials, QQQJ tracks the next 100 largest stocks, hence the name.

QQQJ is similar to QQQ in some ways but different in others. For instance, like its older sister fund, QQQJ is heavy in tech, which is the top sector allocation at 39%.

What has set it apart from inception is a much larger position in health care (20.6% to QQQ's 4.8%) and industrials (10.2% to QQQ's 3.5%).

Since inception, the Next Gen's index has traded similarly to the Nasdaq-100 but with periods of clear outperformance and underperformance.

In October 2021, Invesco launched the Invesco ESG NASDAQ Next Gen 100 ETF (QQJG), an ESG-screened version of QQQJ.

The ESG screening doesn't have much of an impact at present, eliminating just a few holdings.

Then, in October 2022, Invesco introduced the Invesco NASDAQ Future Gen 200 ETF (QQQS) – and no, it's not the next 100 stocks up after the Next Gen ETF.

QQQS tracks the Nasdaq Innovators Completion Cap Index, which is made up of 200 small-cap stocks "with the most valuable patent portfolios relative to their total market value as deemed by Nasdaq," according to the fund site.

The index selects its holdings from the Nasdaq Composite, but those holdings can't be Nasdaq-100 or Nasdaq Next Generation 100 stocks.

Learn more about these ETFs at Invesco: QQQJ | QQJG | QQQS

• Expenses: 0.95%

This last group of ETFs is not for the faint of heart. More specifically, these funds are not designed for buy-and-hold investors. Except for ProShares UltraPro QQQ (TQQQ, which has an expense ratio of 0.84%, the expense ratio for these funds is 0.95%.

ProShares offers several ETFs that provide leveraged, as well as inverse, exposure to the Nasdaq-100 Index.

"Leveraged" exposure typically means the fund produces multiple times the performance of an index on a daily basis.

With the ProShares Ultra QQQ (QLD), you're getting two times – or two-times – the daily performance of the Nasdaq-100. That gives you the opportunity to double your gains . . . but also to double your losses. The ProShares UltraPro QQQ provides three-times positive exposure.

"Inverse" exposure means you're getting the inverse of an index's performance. Let's say the Nasdaq-100 Index goes down 1% tomorrow; the ProShares Short QQQ (PSQ) should gain 1% (minus expenses, of course).

You can combine the two ideas – leveraged and inverse exposure – via the ProShares UltraShort QQQ (QID), a negative two-times fund, and the ProShares UltraPro Short QQQ (SQQQ), a negative three-times fund.

We've previously noted that the ProShares Short S&P500 ETF (SH) provides inverse, or negative 1x, exposure to the S&P 500 and is a fairly safe and straightforward hedge against the market. That makes it one of the best bear market ETFs to buy.

The same goes with PSQ, which also offers negative 1x exposure to the Nasdaq-100. If the market heads higher, these products naturally will lose value – but not at an accelerated rate like their leveraged brethren.

However, two-times and three-times products are best left to day traders and the pros. A wrong bet on these products can compound in a hurry.

They're generally too heavy on risk for most individual investors.

Learn more about these inverse ETFs at ProShares: QLD | TQQQ | PSQ | QID | SQQQ

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This spring, commodity traders and investors in energy stocks around the world looked on with astonishment at oil prices.

In April, West Texas Intermediate crude oil futures went negative for the first time in history, hitting -$37.63 on April 20, shocking global markets. One day trader ended up incurring a $9 million paper loss, as quote screens at brokerage firms like Interactive Brokers, were not programmed to go below $0. (IBKR's issues resulted in a $113 million loss for the firm, Interactive Brokers CEO Thomas Peterffy said.)

However, oil prices, like the broader stock market, did not stay depressed long; futures rebounded sharply, with West Texas Intermediate currently selling around $43 per barrel, and Brent (international) around $46 per barrel. Global demand is also normalizing at about 10% lower year-over-year, though the pace of recovery has been slower than the industry previously anticipated.

So what does this mean for investors in energy stocks?

Oil Prices Are at a Pivot Point for Global Producers

The good news is that between OPEC production cuts and reduced U.S. output, the crude market is broadly balanced.

The bad news: With Brent above $45 per barrel, OPEC might change course from a price-control strategy (production cuts) to a market-share strategy (pump more oil to keep U.S. producers from hedging forward).

A second risk to oil prices is if American producers find a forward curve at $45 attractive enough to resume drilling. The forward curve allows a producer to sell his oil out into the future at an agreed-upon price derived by the market today. But those barrels need to be stored until that future date, so the producer has to add those potential costs into the equation to determine if that future price is feasible.

An oil price high enough to allow American shale producers to continue to pump, store, and sell into the future is exactly what the Russians want to avoid.

As of June 2020, there were 5,729 drilled-but-uncompleted wells in the U.S.; in other words, a tidal wave of U.S. production is just waiting for the right price to rain down on this fragile market. Shale producers have debt obligations to the banks that financed their operations. But when prices are too low to cover costs of production and storage, shale producers can't use that forward curve to sell oil out into the future. That means making a difficult choice between shutting down production or possibly defaulting on debt obligations.

That's the outcome the Russians are hoping for: Keep oil prices just out of reach of shale producers' ability to sell forward, and force them to shut down production.

Russia's Warning

Russian officials have signaled that they would hedge above $45 per barrel. (Hedging is when producers sell their oil forward in the futures market to "lock in" a specific price.) Most likely, they were indicating to OPEC (specifically, Saudi Arabia) that they didn't want to see OPEC production cuts sponsor a recovery in U.S. shale.

In other words, this is an implicit warning from Russia to OPEC: "Kill shale, or we will hedge forward and turn up production, sending prices plunging."

The global oil market involves plenty of game theory for major producers. OPEC, non-OPEC and U.S. producers all work with and against one another based on their competing (but sometimes joined) interests. What one major producer like Russia does has domino effects for the others.

Russia signaling a major hedge at $45 could spook other large oil players such as Mexico, the 11th-largest oil producer, to move as well. Mexico desperately needs a stable oil income to meet its government expenditures. In Mexico's case, it might hedge to set a floor on their oil should futures contracts dip again like they did earlier this year.

Despite these headwinds, oil majors still look very attractive to those with a three- to five-year investment horizon. Even a hint of a working COVID-19 vaccine would see energy stocks fly higher. Eventual coronavirus relief, coupled with trillions of dollars in global stimulus, eventually will lead to inflationary pressures, which will make oil companies a must-have in any portfolio.

Additionally, regardless of who sits in the Oval Office come 2021, a large fiscal stimulus package seems likely, which will make energy stocks – along with agriculture and commodity plays in general – an attractive buy.

One Energy Stock for This Climate

Long ago, BP (BP, $21.14) changed its name from British Petroleum to Beyond Petroleum. It has heavily invested in renewables and is far ahead of its major peers in the renewable space. Thus, while it's still a major oil player, BP also is well-positioned to benefit from an inevitable move to renewable energy.

BP is, like most energy companies, reeling from 2020's plunge in oil prices. On Aug. 4, the company announced it had cut its dividend by 50% to 5.25 cents per share quarterly, pledging to use the remainder of its near-term cash flow to pay down debt. While the dividend cut is disappointing to investors, BP has pledged to keep the remaining dividend (which yields 5.9% at current prices) stable, and the move to reduce debt is a responsible one.

That announcement came along with second-quarter earnings that realized $19.06 per barrel, compared to $40.64 a year ago. But with oil prices back in the mid-$40s, BP should see a notable uptick in Q3 earnings that doesn't seem to be reflected in share prices currently.

One bright spot in BP's second-quarter report was its alternative energy unit. The company maintains 923 megawatts of wind energy capacity, as well as 2.2 gigawatts of solar capacity with plans to expand to 10 gigawatts by 2023. The Southeastern Pennsylvania Transportation Authority recently signed an agreement with BP to purchase 67,029 megawatt-hours of electricity that will be provided by two solar plants in Franklin County, Pennsylvania.

The alternative energy unit is much smaller compared to the company's oil and gas operations, and BP still will be largely reliant on fossil fuels for the foreseeable future. But BP's leading position in the renewables space makes it more diversified compared to its peers, shielding it from an uncertain future in fossil fuels.

A Biden presidency would only accelerate investments in renewables, benefiting BP. But regardless of who occupies the White House, an eventual move to renewables is a foregone conclusion.

As we head into election day, investors are understandably wondering—and even anxious—about how the U.S. presidential election will affect the financial markets. It’s important to remember that this year, especially, the election isn’t the only market driver, or even the main one. “Clearly there’s going to be a market impact from this election, but some of what impacts the market will be decided by a slew of other things beyond who’s at the top of the ticket,” says Ed Mills, a Washington policy analyst with investment firm Raymond James. “Where are we with the virus? Where are we on the economy?”

As the answers to those questions unfold, investors can at least look to history for some clues about the stock market. The four-year presidential market cycle is well known on Wall Street. During a presidential term, markets do best in the third and fourth years—election year and the year preceding it. Politicians tackle unpleasant tasks—a rate or tax hike, say—early on but prime the pump as the election approaches.

Donald Trump’s term has been anything but average. Trump years one and three (2017 and 2019) far outstripped the average price gain in the S&P 500 index for comparable years, going back to Franklin Roosevelt’s term beginning in 1941 through Barack Obama’s presidency, ending in 2016. Trump years two and four have underperformed the average. The question is whether the market’s recent upward trajectory will continue long enough to bring this election year up to average or beyond.

Beware of conventional wisdom that says Wall Street favors business-friendly Republicans at the helm. Since 1928, annualized total returns for the S&P 500 have averaged 13.3% under Democrats, compared with 7.7% under Republicans, according to InvesTech Research. For a hint about who will win the election, keep a close eye on market indexes. If they’re up in the three months preceding the election, the incumbent wins 87% of the time.

Whoever wins will fill top positions at the Securities and Exchange Commission and the Federal Reserve, important decisions for financial markets. As for the candidates’ policies, both party platforms remain sketchy on details in parts. A win by either side could mean different things for different portions of the market. Here are the issues that are likely to have the biggest impact.

Corporate taxes. In 2017, Trump (and a Republican-controlled Congress) cut corporate tax rates from 35% to 21%, spurring profits. If he wins a second term, corporate tax rates will stay the same and S&P 500 earnings could jump 30% in 2021 from 2020, say Credit Suisse analysts.

Biden would seek to raise the corporate tax rate to 28%, which could reduce earnings per share in the S&P 500 by 8% to 12% in 2021, according to estimates from Northern Trust. “Any tax increase is a negative for the markets, but it’s part of a complicated ecosystem,” says Northern Trust’s chief investment officer, Katie Nixon. Biden might spur growth in certain sectors by spending the extra tax dollars on climate, health care and infrastructure initiatives, among others, which could offset the one-time hit of a higher corporate tax rate. And a Democratic administration would be more robust in fiscal stimulus spending to support the economy, says Mills at Raymond James.

Even so, the impact of any tax hike would vary across sectors and even within them. The biggest winners of Trump’s tax cut in 2017—financials, consumer-oriented stocks and shares of communication services firms, which surged as earnings expectations rose—stand to get dinged if tax rates rise. At the other end, utilities and real estate firms benefited less from Trump’s cuts, which bodes well for these sectors should Biden get his increase to 28%.

Biden has other tax changes on his wish list that could disproportionately hit information technology and health care stocks, says Ron Graziano, head of global accounting and tax research at Credit Suisse. Those changes including a doubling of tax rates, from 10.5% to 21%, that multinational companies pay on earnings from intellectual property held or used by foreign subsidiaries.

Altogether, Biden’s tax proposals could weigh heavily on the stock market, given the hit to corporate profits. Firms with strong balance sheets that generate steady cash and profits “have a proven ability to manage, absorb and sidestep potential negative tax issues,” says Graziano. High-quality companies such as Home Depot, JPMorgan Chase and Nike are examples. But Biden may have to wait on tax hikes. “With a soft economy, a big initiative on higher taxes is not how I anticipate things starting off,” says Jonathan Golub, chief stock strategist at Credit Suisse.

Trade with China. Everyone wants to level the playing field with China, safeguarding the intellectual property of U.S. companies and boosting competition between nations on manufacturing and trade. Trump has taken an us-against-them approach, levying tariffs, but Biden would likely use diplomatic and political pressure to take on China by forming a united front with Europe and Japan.

No matter the approach, the cold war is here to stay. “China wants to dominate global technology and we don’t want them to,” says Nixon. “There’s no answer to that dilemma.” Navigate the divide by making sure your portfolio has exposure to both China and U.S. stocks.

Infrastructure. Both sides agree that infrastructure spending is needed, and the passage of any plan would be a big win for industrials and materials companies, including Caterpillar, Vulcan Materials and US Concrete.

But the parties disagree on how to pay for it. Trump’s 2018 plan called for mostly private-sector funding. (He has a $1 trillion plan in the works, but funding details are still unclear.) Biden’s $2 trillion plan would be federally funded, in part by higher corporate taxes.

Although repairing crumbling roads and bridges and investing in 5G wireless and rural broadband are on the to-do list of both sides, some of Biden’s initiatives—increased mass transit and a high-speed rail network—tilt toward lowering our reliance on fossil fuels. Trump’s first-term initiatives, on the other hand, have encouraged fossil-fuel production.

The biggest hurdle for infrastructure initiatives is timing, given the struggling economy. The impact on growth tends to be watered down if a program takes years to play out, says Wells Fargo Investment Institute market strategist Gary Schlossberg. Lawmakers may decide to focus on initiatives that produce instant economic results.

Financials. A Trump win would mean a rally in financial stocks. His campaign website catalogs dozens of regulations eased or removed across sectors, including financials, since taking office. Some moves weakened large parts of the Dodd-Frank Wall Street reform law, enacted after the 2008 financial crisis. Trump, for instance, with bipartisan support, raised the asset threshold for banks that are exempt from some federal oversight—such as stress tests that can help determine whether a bank has the capital to withstand an economic or financial crisis—from $50 billion to $250 billion.

A Biden presidency would shore up the Dodd-Frank regulations again. But re-regulation isn’t new regulation. Financial services firms have the architecture to adapt. They’re “not starting from a dead stop,” says Nixon.

Health care. Biden wants to expand coverage of the Affordable Care Act; Trump wants to abolish the health care law. Both positions create uncertainty that could weigh on health care stock prices.

One area of agreement: lowering drug prices. Trump proposed a rule last year to allow Americans to import some prescription drugs at lower prices from Canada. Biden supports lowering drug prices to match those of other nations, among other proposals.

Innovative drug and medical device stocks are less vulnerable to battles over the ACA and drug prices. You’ll find examples in exchange-traded funds such as iShares US Medical Devices and SPDR S&P Biotech. Hospitals, big winners under the ACA, face the most risk with any uncertainty about the health care law.

Energy and climate. If reelected, Trump would continue to strip away energy regulations and encourage fossil-fuel production. That would lift the energy industry, hobbled this year after a dispute between Saudi Arabia and Russia over limiting oil supply coincided with a pandemic-related fall in demand.

A Biden administration would focus on clean energy and lower emissions standards, among other things, in the name of combating climate change. His $2 trillion clean-energy and infrastructure plan hopes to achieve an emissions-free power sector by 2035 and invest in game-changing clean-energy technologies. That bodes well for green investing strategies, particularly in renewable energy. Although our motives weren’t political, we just added Invesco Wilder­Hill Clean Energy (symbol PBW) to the Kiplinger ETF 20, the list of our favorite exchange-traded funds (see Find the Best ETFs for Your Goals).

Sandra Block, Lisa Gerstner, Nellie S. Huang and Anne Smith contributed to this story.

When it comes to energy stocks, "safety" is in the eye of the beholder.

The world faces a massive supply glut as the coronavirus pandemic has simply removed much of the world's demand for oil. Energy has become so depressed that, a few weeks ago, the unthinkable happened: crude futures went negative. This means producers were paying contract holders to take crude off their hands.

The energy market has normalized since then, and oil has moved higher, but we're still looking at low average prices not seen since the Clinton administration. Prices are still well below breakeven costs for most energy stocks, even some of oil's elder statesmen. Dividends have been cut or suspended. Some – including Whiting Petroleum (WLL) and Diamond Offshore (DOFSQ) – have filed for bankruptcy, and other oil and gas stocks could face the same fate.

Thus, few energy investments feel "safe" right now. But as is the case after every oil crash, some energy stocks will survive. And of that group, some represent considerable bargains. They might not look pretty at the moment; a few have had to cut back on capital projects, even buybacks and dividends. But these moves have made them likelier to survive this downturn and come back swinging on an upturn in oil prices.

Here are seven of the best energy stocks to speculate on as oil tries to claw its way back. It could be a bumpy ride – every one of them could experience more volatility if oil prices swing wildly again. But thanks to smart fiscal management so far in this crisis, they might pan out well for adventurous investors.

Data is as of May 11. Dividend yields are calculated by annualizing the most recent payout and dividing by the share price.

• Market value: $9.6 billion
• Distribution yield: 9.6%*

Historically, pipeline and other energy infrastructure companies – often structured as master limited partnerships (MLPs) – were billed as "toll road operators" for the energy sector. Crude, regardless of price, needs to be stored and shipped, and these infrastructure players do just that, collecting fees along the way. There was little commodity price risk because they were paid on volume.

In an effort to boost profits, many MLPs and other pipeline plays moved into processing and other tangential businesses. This exposed them to directly to the price of crude, which intensified their pain in the current downturn.

Magellan Midstream Partners, LP (MMP, $42.72), however, has largely stuck to its guns. It continues to operate one of the largest networks of pipelines moving crude oil and refined products around the country, with some storage assets as well. In other words, Magellan mostly just moves crude and refined products from Point A to Point B.

In May, the company reported a 38% year-over-year jump in first-quarter net income despite oil's crash during the first three months of the year. Distributable cash flow (DCF) – a non-GAAP (generally accepted accounting principles) measure of profitability that represents cash that can be used to pay distributions – declined, but only by 3.6%.

Better still, Magellan says distribution coverage is expected to be 1.1 to 1.15 times what the company needs to pay shareholders for the rest of the year, despite the weakness in energy prices. This, a month after the company extended its streak of quarterly distribution increases that stretches back to 2010.

In the end, Magellan is as classic a toll-taking pipeline play as they come. Thanks to that, the MLP should be among the best energy stocks to ride out oil's current malaise.

* Distributions are similar to dividends, but are treated as tax-deferred returns of capital and require different paperwork come tax time.

• Market value: $21.3 billion
• Dividend yield: 7.1%

Marathon Petroleum (MPC, $32.70) should be another survivor of the current energy crash.

Unlike energy stocks such as former spinoff Marathon Oil (MRO), MPC has little commodity price risk – or at least, it doesn't have the same kind of risk that exploration-and-production companies have. That's because, as a refiner, Marathon can actually benefit from lower crude oil prices: The lower the cost for feedstocks, the better the margins on finished products such as gasoline, jet fuel, even plastic.

That's the good news.

The bad news is that MPC has suffered lower overall fuel demand. As we hunker down to work from home, rather than drive to work or fly to meetings, refined-product use is tumbling. The Energy Information Administration estimates that U.S. gasoline consumption fell by 1.7 million barrels per day during the first quarter of 2020. In the same quarter, Marathon was forced to take a whopping $12.4 billion impairment charge and suffered a net loss of $9.2 billion.

That might sound worse than it really is. In reality, the refining industry is prone to swings – COVID-19 is just the latest. Institutional investors realize this, which is why MPC has been able to easily tap the debt markets. MPC has made moves such as raising $2.5 billion in senior notes and adding a $1 billion revolving credit facility, giving the company available borrowing capacity of about $6.75 billion.

Marathon Petroleum also has slashed capital expenditures by $1.4 billion, suspended share buybacks and decided to idle some refining facilities. But so far, it hasn't touched the dividend.

The EIA estimates gasoline demand will improve during the back half of 2020. Marathon appears to be well-equipped to survive the current headaches and eventually bounce back, likely with its high-yielding dividend intact.

• Market value: $45.3 billion
• Dividend yield: 4.0%

"Déjà Vu" is French for "already seen." And for major independent energy producer ConocoPhillips (COP, $42.27) … well, it has seen something like this before.

Back in 2014, the last time crude oil took a serious plunge, ConocoPhillips was a different animal. It was full of expensive projects and bloated capital spending requirements, and it wasn't nearly the shale player it was today. In the years since, Conoco sold expensive deep-sea operations, cut its dividend, paid off debt and become a shale superstar. This "lean and mean" operation worked, and COP became the blueprint for many other energy firms.

That also prepared ConocoPhillips to better withstand the current low-oil environment.

Yes, COP did decide to tighten its belt in March and April, announcing capital expenditure, output and share repurchase reductions. And yes, ConocoPhillips did lose $1.7 billion during the first quarter. But it still managed to generate $1.6 billion in cash flows from operations – enough to pay its dividend, expenditures and buybacks. The company also finished the quarter with more than $8 billion in cash and short-term investments, and more than $14 billion in liquidity once you factor in the $6 billion left on its revolver.

In fact, the company's in a good enough position that CEO Ryan Lance told CNBC he's "on the lookout" for acquisition targets.

Conoco, in taking its lumps years ago, became a better energy stock. That should give investors confidence in its ability to navigate this crisis.

• Market value: $127.9 billion
• Dividend yield: 3.9%

Integrated energy giant Royal Dutch Shell (RDS.A, $32.76) did something recently that it hasn't done since World War II: It cut its dividend, from 47 cents per share to 16 cents. The news shocked the energy sector and broke the company's 75-year streak of payout continuity.

Shares of RDS.A, which are off 44% year-to-date, dropped nearly 13% on the announcement.

But perhaps investors should be buying with two fists. Because Royal Dutch Shell could end up being stronger for it once this is all done.

Shell's dividend cut was more proactive than reactive. Truth be told, Shell's first quarter didn't look all that bad. While the company suffered a small $24 million net loss, its "current cost of supplies (CCS) basis" earnings, backing out certain items, came to $2.9 billion, which wasn't far off CCS earnings from Q4 2019. Cash from operations clocked in at $14.8 billion, which would've been only a little shy of capital expenditures and its original dividend amount.

Shell appears to be taking the Conoco approach to this downturn.

To start the announcement of the dividend cut, Shell CEO Ben van Beurden said, "The world has fundamentally changed." And it's clear he's preparing for it. Shell might have been able to squeeze out its dividend for a few more quarters under these circumstances, but instead, the company decided to focus on fiscal strength now, enabling it to not just survive, but potentially be acquisitive and otherwise expand when the time is right.

It was a bitter pill for existing shareholders. But RDS.A still might be one of the best energy stocks for new shareholders, who will enjoy a decent yield around 4% from a company much better positioned to ride out the rest of this downturn.

• Market value: $29.0 billion
• Dividend yield: 3.0%

The story at EOG Resources (EOG, $49.84) has always been the strength of its asset base.

EOG was one of the earliest frackers, and it moved into some of the best shale fields long before anyone else. This gave it prime acreage in places such as the Permian Basin, Eagle Ford and Bakken fields. The result of these premier wells has been lower costs, higher production rates and better cash generation than many competing energy stocks.

Despite its positioning, oil, which currently trades in the mid-$20s, still is too low for EOG to make a profit off it. So the company is pulling out its 2014 playbook. That is, EOG is drilling wells but not completing them. This will allow EOG to take advantage of low services costs and "turn the spigot on" at a later date. For now, it's shutting off roughly 40,000 barrels of oil per day worth of production, and it's reducing its capex spending by about $1 billion from a previously updated budget. All told, EOG has cut back planned capex by 46% from its original 2020 estimates.

The combination of already low costs and savings via well shut-ins allows EOG to keep its balance sheet healthy. EOG Resources finished Q1 with $2.9 billion of cash on hand and $2 billion available on its unsecured revolver. It also had no trouble raising an additional $1.5 billion in a bond sale at the end of April.

If oil manages to get into the low $30s, EOG should be able to fund its capital budget and dividends via cash flow for the rest of the year.

• Market value: $24.1 billion
• Dividend yield: 2.9%

It stands to reason that if oil firms are suspending drilling, the firms providing drilling equipment won't see much business. That has been the case for Schlumberger (SLB, $17.36), which is off 57% year-to-date as rig counts in North America plunge.

Schlumberger's North American revenues slipped 7% quarter-over-quarter in Q1, following a double-digit decline at the end of 2019, and overall sales declined 5%. Margins contracted as SLB had to cut its services prices to compete. All of this translated into a hefty GAAP loss.

The biggest headline, however, was a 75% cut to the dividend.

Schlumberger is thinking ahead. The company reported positive free cash flow of $178 million – after recording a negative number a year ago. (Cash flow was even more robust in the quarters prior, however, so naturally prices are taking a toll.) Cutting the dividend, from 50 cents quarter to 12.5 cents, should save about $500 million quarterly. That'll help bolster its $3.3 billion cash position and help it pay off its debts more quickly.

Also, while North America is painting a bleak picture, SLB's hefty international operations are showing a little resilience. While off 10% from the previous quarter, sales were up 2% year-over-year. State-run oil companies operate under a very different directive than public ones; as such, they often keep drilling when many public companies wouldn't.

Schlumberger does indeed need oil prices to continue rebounding for the stock to emerge from this deep slump. But the combination of a more fortified balance sheet and a wide operational footprint should help keep the company afloat until then.

• Market value: $4.5 billion
• Dividend yield: N/A

One of the biggest misconceptions is that solar energy and oil prices go hand in hand. As a result, when oil drops, solar stocks tend to plunge, too.

That's just silly. Petroleum-powered electric plants are a dying breed in the U.S., and currently comprise about half a percent of overall production. Solar now accounts for 1.8% and is assuredly on the rise.

But this misconstrued relationship could mean an opportunity for investors in leader First Solar (FSLR, $42.87).

First Solar not only makes high-efficiency panels, but it even builds and operates utility-scale solar plants. And while shares have declined 23% year-to-date, the company showed signs of resiliency in its first-quarter earnings. Revenues were marginally higher than in the year-ago period, and the company delivered a $90.7 million profit versus a $67.6 million loss. FSLR also recorded 1.1 gigawatts (direct current) of new net bookings for its Series 6 panels. That means utilities and installers still are looking out to the future despite the coronavirus' economic impact.

First Solar also boasts $1.6 billion in cash and marketable securities, and it's cash flow-positive. The company has provided limited guidance, but it says it plans on spending $450 million to $550 million in capital projects. That means without earning another dime, First Solar still has about three years' worth of working capital on its hands.

First Solar is the largest player in a growing field. And solar's tether to oil goes both ways, giving FSLR the potential to be one of the best energy stocks as oil prices recover.

Certain sectors of the stock market have gained a reputation for being income-friendly. If you want dividends, you know to look at utilities, consumer staples and real estate investment trusts (REITs). Energy stocks – which include numerous high yielders – aren’t always first to mind, however.

Why? Energy stocks – which are tied to energy prices, which are tied not just to supply and demand, but also politics and currency strength, can be volatile over the short-term. Weak oil, natural gas and other commodity prices made energy stocks grossly underperform the market in 2014-15, for instance, but recoveries stoke outperformance like what we’re seeing so far in 2019.

Dividend investors should consider the opportunity in the energy sector right now. For one, West Texas Intermediate crude oil currently is near the $65-per-barrel mark, well off its recent low of $49 in December. Higher prices mean higher revenues – and oil companies, which were forced to improve their operations to squeeze more profits out of low oil prices, are generating even better earnings and cash from those revenues. Greater profitability naturally encourages investors to drive share prices higher, and that cash is used to fund generous and sometimes growing payouts.

Also, many integrated oil companies as well as dedicated exploration and production firms are being prudent about their capital expenditures, instead budgeting with an eye toward generating cash and funding dividends from existing projects.

Here are 10 energy stocks and funds to buy for a 1-2 combo of dividends and growth. These picks vary in their balance – some are slow-moving high yielders, some are growthy plays with modest yields and some fall squarely in between.

Data is as of April 7, 2019. Dividend yields are calculated by annualizing the most recent quarterly payout and dividing by the share price.

• Market value: $240.2 billion
• Dividend yield: 3.8%
• Chevron (CVX, $162.42) is one of the world’s largest integrated oil majors – which means it’s involved in every step of the process, from finding energy sources to delivering refined products to end customers.

Chevron’s recent history shows a clear priority of dividends over stock buybacks. When plunging oil prices cramped the energy sector in 2014-15, Chevron suspended its share repurchases and didn’t resume until 2018. Meanwhile, even as pundits questioned whether CVX’s dividend was safe, the company continued its decades-long streak of payout increases – it remains a Dividend Aristocrat, with 32 consecutive years of annual dividend hikes.

Roughly 58% of the company’s earnings go toward funding the dividend, which means the payout is quite sustainable. But naturally, because profits fluctuate with oil prices, so too does that ratio – so sometimes, it can feel like Chevron is just getting by.

Chevron’s capital expenditures have contracted significantly, from $38 billion in 2013 to $13.8 billion in 2018. It will increase that figure to $20 billion in 2019, but Chevron management clearly sees a priority in not overextending itself.

Morgan Stanley analysts started CVX shares at “Overweight” (equivalent of “Buy”) at the start of April, citing Chevron’s focus on generating strong cash flow and writing that “cash flow drives stock performance in Big Oil.”

• Market value: $36.2 billion
• Dividend yield: 4.3%

Refiner Valero (VLO, $86.69) is another generous yielder that hovers around (in this case, above) the 4% mark.

Valero – the world’s largest independent petroleum refiner – owns and operates 16 refineries across the U.S., Canada and Wales. Whereas exploration and production companies tend to simply become more profitable as oil prices rise, refiners like Valero are a bit more complicated. Oil refiners make money off the “crack spread” – basically, the difference between the cost of buying the oil, and what price they can get for the refined product (say, gasoline).

Valero, unlike Chevron, did have to cut its dividend in relatively recent history (2010). However, it has been much more aggressive about growing it in the aftermath. The payout has more than doubled during the past five years, from 40 cents to 90 cents. That includes a 12.5% dividend increase announced in January of this year.

Morningstar analyst Allen Good thinks the refiner made the right moves years ago to position itself well for today. “We think Valero moved deftly to capitalize on the downturn in 2008-09 by divesting underperforming assets and adding strategic assets cheaply to high-grade the overall portfolio, which should lead to higher returns,” he writes. “Adding ethanol facilities out of bankruptcy should allow Valero to lower costs and position itself for government mandates that appear to be here to stay.”

Also in January, Valero completed the acquisition of its affiliated master limited partnership (MLP), pipeline operator Valero Energy Partners. That follows a string of similar moves throughout the energy sector of parent companies merging with their MLPs – a response to a change in federal tax law that knocked out a key benefit for these partnerships.

• Market value: $349.3 billion
• Dividend yield: 4.0%

Rather than restraining capital expenditures and increasing dividends to shareholders, as other major integrated oils have been under pressure by investors to do, Exxon Mobil (XOM, $82.49) – one of the largest integrated oil majors in the world – is accelerating its capex.

Exxon has a plan to drive profits from $15 billion in 2017 to $31 billion by 2025, as well as improve return on invested capital from 7% in 2017 to 15% by 2025. Under this plan, XOM would spend $24 billion on capital projects this year, $28 billion next year and an average of $30 billion from 2023 to 2025. This plan stands in stark contrast to many of Exxon’s other peers.

That shouldn’t worry income investors, however. A Bank of America analysis finds that Exxon Mobil can fund its expansion while still funding (and increasing) its dividend.

Exxon certainly cares about consistently raising its payout. Like Chevron, Exxon Mobil is a Dividend Aristocrat, boasting 36 years of consecutive annual increases.

• Market value: $5.0 billion
• Dividend yield: 3.4%

Global exploration and production company Murphy Oil (MUR, $28.89) finally buckled under pressure in 2016. After years of dividend growth, it actually made a cut to its payout – from 35 cents per share to 25 cents, where the dividend has been stuck ever since. The silver lining is that the cut was less drastic than what several other energy stocks had to execute: ConocoPhillips (COP), for instance, hacked its payout by two-thirds in 2016.

However, even after Murphy’s reduction, shares still yield well more than 3% at current prices. That dividend cut also helped Murphy shore up its financials. In December 2018, for instance, Murphy’s upgraded the company’s debt from Ba3 to Ba2 – still on the high end of “junk,” but a step closer to investment-grade.

Standard & Poor’s/CFRA notes that even at the high end of management’s guidance range of $1.3 billion to $1.5 billion in capital expenditures, Murphy is likely to generate “meaningful” free cash flow and is well-positioned to continue funding its dividend at current levels.

• Market value: $50.9 billion
• Dividend yield: 4.7%

E&P giant Occidental Petroleum (OXY, $68.04) has in recent years sold less-valuable assets and used the proceeds to invest in higher-return projects in the Permian Basin, located in west Texas and southeastern New Mexico.

That should help growth in the long-term, though Oppenheimer analyst Tim Rezvan, who has shares at “Hold,” says that story might need a little time to play out – though investors will collect a considerable sum of income to wait.

“Occidental will focus growth on its workhorse Permian asset (24% growth CAGR through 2022), and we see long-term international catalysts, but nothing near term to increase the ~2% dividend growth CAGR since 2015,” he writes. “We believe the 4.8% dividend yield sets a floor for OXY shares at $60, but we see shares rangebound as the next stages of upstream growth unfold.”

Wells Fargo analysts like Occidental’s strong balance sheet and its production levels in one of the top shale fields in Permian Basin. They also believe OXY can continue increasing its dividend payments – something it has already done for 16 consecutive years.

• Market value: $20.8 billion
• Distribution yield: 5.6%*
• Cheniere Energy Partners LP (CQP, $42.11) is an MLP that deals in liquefied natural gas (LNG) terminals and natural gas pipelines. Its facilities include the Sabine Pass LNG terminal near the Gulf of Mexico, as well as the Creole Trail Pipeline in Louisiana. Revenue has soared in the wake of the Sabine Pass’ opening in 2016, and expansion in 2017 and 2018.

Companies such as CQP – which was formed by LNG company Cheniere Energy (LNG) in 2006 – tend to be a little more insulated from energy-price fluctuations because they don’t make money by selling the product – instead, it’s based off the amount of product that flows through their facilities. Think of it as a toll taker of sorts.

Natural gas exports have increased dramatically over the past two years, and thanks to the shale revolution (e.g., fracking and horizontal drilling), this trend appears likely to continue. Driven by these tailwinds, Cheniere Energy Partners LP should continue to generate large (and growing) cash distributions over the next several years. While the company’s payout remained fixed at 43 cents quarterly for roughly its first decade of operations, the payout inched ahead to 44 cents at the end of 2017 … and has grown every quarter since, to a current 59 cents.

Further, Cheniere has plans to expand. The company’s Corpus Christi liquefaction facility’s first “train” produced its first LNG in November 2018. The second train will reach “substantial completion” in the back half of this year, followed by a third train to be completed by the second half of 2021.

* Distributions are similar to dividends but are treated as tax-deferred returns of capital and require different paperwork come tax time.

• Market value: $7.0 billion
• Distribution yield: 8.0%
• Tallgrass Energy LP (TGE, $24.81) is a mid-cap MLP that transports crude oil and natural gas from the Rockies, Midwest and Appalachian regions. Its operations span 8,300 miles of natural gas pipeline and more than 800 miles of crude pipeline – as well as 300-plus miles of water pipeline.

The company – which since inception in 2012 has already split into MLP and general partner, then merged back – has grown its distribution every quarter since mid-2015, from 7.3 cents per share at the time to a current 51 cents. But the company isn’t stretching to meet its obligations; in fact, its debt was assigned an investment-worthy credit rating by Fitch in September 2018.

But Tallgrass Energy also has significant growth prospects. Its expansion plans include a joint venture with pipeline behemoth Kinder Morgan (KMI) to increase pipeline capacity in the Rockies, as well as projects designed to transport crude to export facilities.

• Market value: $13.8 billion
• Yield: 3.1%*
• Expenses: 0.13%

Investors wanting to make a broader bet on the energy sector across more than one or two stocks may want to consider an exchange-traded funds (ETFs).

The first one we’ll cover is the Energy Select Sector SPDR Fund (XLE, $67.71), the largest ETF (by assets under management) dedicated to energy stocks.

The XLE provides investors access to numerous energy industries, including E&P, refining, marketing, and even equipment and services firms. It also holds many of the stocks we’ve highlighted – Exxon Mobil, Chevron, Occidental and Valero are all top-10 holdings.

Just understand that XOM and CVX both hold significant sway on this fund – they combine to command 42% of the fund’s assets, which means big gains or losses in those two firms will say a lot about how XLE performs.

Still, this 29-stock fund is a more diversified bet than buying just a couple of the sector’s companies. And despite XLE’s problems during the 2014-15 energy swoon, Morningstar still has given it a five-star rating over the trailing five- and 10-year periods for its high total returns and low risk.

* Dividend yield represents the trailing 12-month yield, which is a standard measure for equity funds.

• Market value: $208.6 million
• Yield: 2.4%
• Expenses: 0.47%

Investors who wish to avoid investing in fossil-fuel producers could consider the iShares Global Clean Energy (ICLN, $10.10) ETF, which invests entirely in companies that deal in renewable sources of energy, such as solar and wind.

When U.S. investors typically think of “green” stocks, they often think of solar stocks such as First Solar that don’t deliver dividends. However, ICLN is heavily international in nature, and several foreign green-energy companies do return cash to shareholders. A little more than one-third of this 31-stock portfolio is in American stocks – another 22% is invested in China, 10.4% in New Zealand and 8% in Brazil, with smaller amounts dedicated to a handful of other countries.

Top holdings include Spain’s Siemens Gamesa Renewable Energy (GCTAY), Denmark’s Vestas Wind Systems (VWDRY) and Brazil’s Companhia Energetica Minas Gerais (CIG).

• Market value: $2.1 billion
• Yield: 0.9%
• Expenses: 0.35%

The final ETF certainly leans much more heavily toward growth than income, and it in fact boasts the thinnest yield on this list. But it’s still worth a look.

The SPDR S&P Oil & Gas Exploration & Production ETF (XOP, $31.81) is an industry ETF that focuses on a small, specific subset of energy stocks – E&P players. Unlike stocks such as Exxon Mobil and Chevron that have their hands across various “streams” of the energy chain, XOP invests in companies that are focused solely on upstream – exploring for assets and then tapping them to produce oil and natural gas.

Because of this industry’s reliance on commodity prices – as well as a relatively modest median market cap of about $2.7 billion – this fund can swing strongly on changes in prices of crude and nat gas.

But this is a broader portfolio than the previous two funds; XOP invests in more than 60 stocks. Top holdings include California Resources (CRC), Whiting Petroleum (WLL) and Oasis Petroleum (OAS).

Energy stocks have had a difficult 2018. Mostly flat performance through most of the year turned into a tailspin in October as oil prices plunged from above $75 per barrel to below $50. That in turn has pinched oil companies that rely on elevated commodity prices to drive larger profits.

The headwinds are clear. Demand has slowed to a crawl, and supplies have piled up despite production cuts from several nations. Fears about U.S.-China trade relations have weighed, as have worries about sanctions on Iran.

It’s no wonder why energy stocks have taken it on the chin.

But the skies are starting to clear as we head into 2019. OPEC and other nations are beginning to discuss additional output curbs, and with U.S. shale producers running at full capacity, there really isn’t much room for them to pick up any slack. The U.S. and China have made progress on trade talks, too, including a 90-day moratorium on increasing tariffs.

Investors diving into the sector still need to be choosy. A rebound in oil is far from a certainty, which means it’s necessary to put a premium on quality right now. Here, we look at the 10 best energy stocks to buy for 2019 – those that can best take advantage of the current energy environment.

Data is as of Dec. 3, 2018. Dividend yields are calculated by annualizing the most recent quarterly payout and dividing by the share price.

• Market value: $340.8 billion
• Dividend yield: 4.1%

Most lists of energy stocks at any time include the biggest American player in the space: Exxon Mobil (XOM, $79.50). But Exxon hasn’t really felt like the king of late.

Believe it or not, Exxon is starting to fall behind some of its rivals in terms of reporting lower year-over-year production figures, and in terms of stock returns. That’s what makes the current oil-price environment so interesting for the integrated energy giant.

When oil prices crashed a few years ago, Exxon clamped down on capital expenses, reducing its capex by 25% to under $23 billion. It also ended its lucrative buyback program to preserve cash. The result of these moves was a clip in production; for instance, at the start of Q1 2018, total oil and gas production decreased 6% year-over-year. At the same time, rivals who kept the spigots going now have projects that are starting to gush.

But Exxon has a new plan. The energy major will push its capital spending from $24 billion in 2018 to $28 billion in 2019, and eventually get up to an average of about $30 billion between 2023 and 2025. Much of this will be focused on high-margin areas such as the Permian Basin or new prolific fields such as offshore operations in Guyana. Upside from the Permian already started to show up for Exxon in 2018, and Guyana should significantly improve its production within the company’s official target of five years.

Patient investors waiting for Exxon to realize its long-term potential will be paid a hefty 4% annually in dividends just to wait

• Market value: $230.1 billion
• Dividend yield: 3.8%
• Chevron (CVX, $118.94) is another Big Oil stock that has been thinking smaller of late. The oil rout of 2014-15 constricted the company’s cash flows and production figures, and ultimately led to questions about the company’s dividend. While CVX ultimately never cut it, Chevron did leave the quarterly dividend flat in 2015, only raised it 1 cent in 2016, then kept it flat again in 2017.

The foot-dragging was a necessity, as Chevron was being forced to lean heavily on asset sales and its balance sheet to fund capex spending and its dividend.

But now, Chevron’s benefitting from its lean-time strategy. Several big-name projects have come online to produce both crude oil and natural gas. Its Wheatstone and Gorgon liquefied natural gas (LNG) facilities are finally up and running, while several new fields in the Permian and in the Gulf are pumping out crude. In its Q3 report, Chevron announced a record quarterly production figure of 2.96 million barrels per day. This prompted an upgrade from Credit Suisse, which said CVX “continues to execute on its already superior growth outlook.”

Chevron is now pulling back on its capex spending to about $19 billion – down from the $25 billion to $30 billion it has spent over the past few years. That should pad the bottom line, giving the dividend a little more breathing room to grow.

• Market value: $53.5 billion
• Dividend yield: 4.4%
• Occidental Petroleum (OXY, $70.27) is a second-tier name in energy, but investors who pass it by on name recognition alone are losing out.

Occidental is considered a “mini-integrated” oil firm. It features plenty of up-, mid- and downstream assets, basically from wellhead to end user. It’s just not as huge as Exxon or Chevron, but neither is it a pure exploration-and-production player. It makes it more difficult for investors to evaluate.

But OXY could be a “Goldilocks” energy stock: not too big, not too small.

Occidental has long been a top producer in some low-cost regions. It owns 2.5 million net acres in the Permian Basin. Additionally, it has some major legacy assets in Qatar, Oman and the United Arab Emirates. This creates a very low-cost output profile that allows OXY to score big when oil prices rise. During its latest investor presentation, the company’s management should that its current cost structure should allow it cover CAPEX and increase its dividend with West Texas Intermediate oil – the primary American benchmark – at $50 per barrel.

On the flipside, Occidental’s refining assets focus more on chemical production rather than gasoline and fuels. Typically, chemicals and base-plastics have much higher margins than gas.

OXY has been able to generate five-year average free cash flows of around $1.2 billion, according to Morningstar data. This period includes the latest oil rout and shows that OXY’s mix of assets can keep it and investors afloat in most energy environments.

• Market value: $137.4 billion
• Dividend yield: 6.1%

The Deepwater Horizon and its aftermath hounded international integrated giant BP plc (BP, $40.35) and its stock for years. One of the worst oil spills in history resulted in billions of dollars in fines, fees, lawsuits and compensation. The total bill to date is just under $62 billion.

To pay that bill, BP cut spending, sold off billions of dollars’ worth of assets and created a script dividend program in which investors were able to receive payouts in additional shares rather than cash.

Finally, though, BP is starting to leave the Deepwater Horizon disaster behind. Once it makes a few final small settlement payments in 2019, it will be freed from the massive financial burden – just in time.

BP’s focus has necessarily been squeezing out as much profit per barrel as possible. The company earned $3.8 billion in its third quarter, for instance, more than doubling its profits from the year-ago period. That builds on two previous quarters of strong profits. Said CEO Bob Dudley, “We now have a base business that can balance itself at $49 a barrel.” That’s important considering the current environment in crude prices.

BP’s cash has now returned to levels where it can cover a real dividend, as well as expand its capex. That should propel the dividend stock in 2019.

• Market value: $62.0 billion
• Dividend yield: 0.9%
• EOG Resources (EOG, $103.31) was fracking before it was cool.

Years ago – as Enron Oil & Gas – EOG was one of the first movers into the “Big Three” shale fields: the Eagle Ford, Permian and Bakken. That allowed it to build out some of the largest, choicest drilling locations in each field. That first-mover status in turn has helped it realize great mechanics and efficiencies from its wells.

Thanks to EOG’s superior quality of reserves, the firm boasts one of the lowest breakeven costs in the business. According to its latest management presentation, EOG can still pull a 30% direct after-tax rate of return (ATROR) from WTI-benchmarked oil at $40 per barrel. It makes 100% when oil gets up to $60 per barrel.

EOG used the current energy-price malaise to secure roughly 65% of its future well costs today. EOG Resources COO Lloyd Helms said during the latest quarterly earnings call that the current negotiated structure for services provides the company with “a great deal of flexibility to adjust our activity level in 2019,” and that “by doing so, we expect to reduce total well cost again in 2019.” Helms predicts its drilling costs will fall another 5% next year.

And any dip in costs will only help the bottom line.

• Market value: $78.5 billion
• Dividend yield: 1.8%

Leading independent E&P company ConocoPhillips (COP, $66.18) has had to make several hard decisions over the past few years that are finally paying off.

Those hard decisions included a dividend cut in 2016. The 66% haircut to the payout, as well as capex cuts, have turned out to be godsend, however. Conoco was one of the first oil stocks to get “lean and mean,” focusing its now-lower capital spending on top shale fields and other promising plays. Shale fields such as Bakken, Eagle Ford, and Permian Basin have well mechanics with breakeven costs as low as $35 per barrel. Conoco quickly has become one of the top dogs in all three of those regions with more than 1.8 million total acres under its control.

This has helped the bottom line, with COP reporting a more-than-350% year-over-year surge in its most recent quarterly profits. The three aforementioned fields saw production jump by more than 48%.

As a result, COP has resumed buybacks and started growing its dividend once more. With its latest increase, Conoco’s payout has grown 22% since it was slashed in 2016. And ConocoPhillips can continue to function well in today’s low-price environment.

• Market value: $14.3 billion
• Dividend yield: 1.2%
• Marathon Oil (MRO, $16.69) once was an integrated giant that owned both production and refining assets. Just like Conoco, MRO sought to rid itself of those refining assets, which were slow-moving and money-losing at the time. But that spinoff seemed ill-timed; Marathon was left without any downstream assets that could have taken advantage of the lower oil prices from the 2014-15 crash.

Marathon didn’t have the size advantage Conoco did, however. As oil plunged, investors took shares to the woodshed. At one point, you could buy MRO shares for around the price of an Extra Value Meal. Fearing oil would stay lower for longer, Marathon cut its capex budget by more than 20% and reduced its dividend by more than three-quarters.

MRO pruned assets, too, including selling its Canadian oil sands holdings that, as CEO Lee Tillman put it, “represented about a third of our Company’s other operating and production expenses, yet only about 12 percent of our production volumes.” It instead focused its attention on the Permian, as well as the Bakken and Eagle Ford. Today, more than 70% of Marathon’s production comes from U.S. sources. These low-cost fields are allowing MRO to balance capex spending and dividends at just $50 per barrel of WTI crude.

Marathon offers a similar gains profile to COP in the current environment.

• Market value: $13.2 billion
• Dividend yield: 1.2%

If you haven’t heard of Devon Energy (DVN, $27.03), you’ll be glad to learn about it now.

Devon originally was a natural-gas-focused firm, which was fine until nat-gas prices – thanks to fracking’s efficiency – tanked hard in the late aughts. DVN shares were put on the backburner.

To counteract this, Devon management plowed into a variety of shale oil plays including the Eagle Ford, as well as Oklahoma’s “STACK” region, Delaware Basin and in the Rocky Mountains. It also sold natural gas assets. As a result, 63% of its production (as of the end of 2017) comes from crude oil and NGLs.

This has been a boon operationally. Devon recently reported a big profit beat and produced $807 million in operating cash flow during the quarter. This fully funded its drilling program with about $250 million left over.

DVN shares have chronically underperformed the rest of the sector, anyway. But Devon could be a sneaky play. The company has a $4 billion share repurchase program that should finish in early 2019 – a program that will reduce its outstanding common stock by about 20% in total.

• Market value: $27.6 billion
• Dividend yield: 2.0%

The current oil-price environment means Anadarko Petroleum (APC, $52.90) has a target on its back yet again.

If you were to take Exxon and break it apart, Anadarko would be the part that actually pulls out the oil – and it does so all over the world. So if you were an Exxon or a Chevron and needed expand your own production profile, you could move the needle by acquiring APC. Moreover, the recent rout in energy stocks has made Anadarko more affordable at less than $30 billion.

There are several other reasons to believe an energy giant might come to the table and eat. Anadarko has reduced its costs and increased its percentage of crude oil production thanks to shale. Its operations are so good that their breakeven points are in the $20- to $30-per-barrel range. Across all assets, APC sees incremental cash flows above $50 per barrel. And with Anadarko recently selling off its midstream assets, it looks more like a pure E&P player every day. That’s exactly what a company like Exxon might want.

Even if a buyout doesn’t happen, APC’s continued improvements have resulted in shrinking losses. Moreover, the company – which had to reduce its dividend from 27 cents quarterly to 5 cents in 2016 – restored it to 25 cents in 2018, and even raised it up to 30 cents.

• Market value: $2.8 billion
• Dividend yield: N/A
• Chesapeake Energy (CHK, $2.92) is the most aggressive play on this list, and in fact, you could call it a “lottery ticket” stock. In fact, at just less than $3 per share currently, it’s priced like one.

Chesapeake’s low price is a result of numerous missteps.

Chesapeake is one of the biggest shale drillers of natural gas in the U.S. But to gain its size, it binged on debt. At one point, it had more than $21 billion in IOUs to its name. That wrecked Chesapeake when natural gas and oil cratered in 2014-15. The firm went on an asset-selling spree to raise funds so it could still drill while reducing that huge burden. It did clip that net debt down to around $9.4 billion – not great considering its total shareholder equity is around $3.4 billion, but it is a marked improvement.

Cash is improving, too. Higher-margin oil now represents around 19% of production. That helped Chesapeake record more than $504 million in cash from operating activities last quarter. Continued moves into shale have management predicting that 30% of its production will come from oil in 2019.

CHK is improving. There’s still a lot of risk – most notably, that debt – but it has the potential to be one of the bigger-reward energy stocks to buy in 2019.

While stock prices continue to bounce around following their tumble earlier this year, crude oil is back near new highs. In fact, despite the stock market’s super run in 2017, crude oil actually outperformed stocks starting in June. And it continues to do so here in April 2018.

That means investors have a choice during the current volatile environment for stocks. And that does not necessarily mean speculating in commodities. Energy stocks representing companies that explore, drill, produce and refine oil finally look positioned to lead the stock market to the upside.

How can this be? For years, the fundamentals of “black gold” were rather dour. It was fairly common to see headlines saying, “the world is awash in oil” or “crude oil inventories rise again.” Indeed, the U.S. became a net exporter of oil in May 2011 and the third-largest producer of crude oil in 2014, after Saudi Arabia and Russia.

Source: U.S. Energy Information Administration

No wonder oil was a forgotten investment.

But very quietly in recent months, oil’s fundamentals changed for the better. We can credit a combination of the pickup in the global economy, firmness attributed to heightened geopolitical risk in the oil-producing Middle East and decline in those oil stockpiles.

In fact, the decline in the amount of oil in storage started in May of last year, just before crude oil prices bottomed. It is the first truly meaningful decline since 1999-2001.

On the technical side, crude prices scored a breakout to the upside this month. It was the culmination of a three-year sideways range, called a basing pattern, in which bulls and bears test their strategies. Despite several rather sizeable short-term moves higher and lower, neither side was confident in their long-term view.

That is, until this year.

While neither the technical or fundamental side is signaling a return to $100-per-barrel oil prices any time soon, the tone of the market is bullish. The question is: What should investors buy?

Investors who do not want to speculate in the futures market can look at the United States Oil Fund (USO, $13.75) as a proxy. This is an exchange-traded product (ETP) that holds near-month crude oil futures contracts and rolls them over when each reaches maturity. It is far from a perfect match to crude oil prices, but it does follow the trends, and is itself in a bull market at this time.

Even though investors can buy and sell USO just as they do a stock, it is still an investment tied to the futures market. Not everyone is comfortable with that. For those people, many energy stocks also show rising longer-term trends and “technical” breakouts – sudden moves attached to various stock-chart patterns.

Newfield Exploration

From the oil and gas exploration and production group, Newfield Exploration Company (NFX, $27.91) was one of the worst performers over the past 17 months as it fell from a high of $50 to a low of $22.72. On Feb. 21, the company released better-than-expected Q4 earnings, yet the stock tumbled more than 10% that day.

In charting lingo, it was the culmination of a bearish trend and ended with a selling climax. This is a final washout where the last bulls finally throw in the towel. The good news is that it sets up a rather strong condition for a rally. Indeed, buyers started to test the waters and money started to flow back into the stock shortly thereafter. All that was needed to unleash this bullish sentiment was crude oil’s move to a three-year high in April.

The trailing 12-month price-to-earnings ratio on NFX is roughly 13, which is below the sector’s average P/E. Its forward P/E (based on analyst estimates for the coming year’s earnings) is 8.9, which also is historically on the low side.

That means the market has not yet priced the stock for the improvements expected by analysts.

Technically, NFX is rising off the bottom of a multiyear trading range at around $23 per share. The top of the range is near $48, so there is plenty of room for the stock to rally before running into an overwhelming amount of supply, or sellers willing to unload shares at what was historically an expensive price.

Chevron

Newfield does not pay a dividend, but there are energy stocks in rising trends that do. Of the major companies, Chevron (CVX, $122.31) has many favorable characteristics, including a 3.6% dividend yield.

Chevron’s quarterly earnings have been mostly trending higher since early 2016. Analysts expect that trend to continue with a sizeable jump in their estimates for Q1 2018, due for release later this week.

The company raised its dividend Jan. 31, which is always welcomed by investors. And Chevron’s stock price reacts to crude oil price changes, so the commodity provides additional wind in the stock’s sails.

In early February, despite reporting higher earnings than the quarter before, analysts expected more. The stock tumbled, likely exacerbated by the sudden and steep drop in the broader market when leading technology stocks finally pulled back. Technical indicators suggested that the reaction was overdone as very little money left the stock. In essence, it provided a nice buying opportunity and, with the rally in April, the bulls are back in charge.

A run at the all-time high set in 2014 is not much of a stretch from current price levels. If and when it gets there, we will have to see how it reacts. Continued short-term strength would be a good sign that CVX can rally for much of the rest of the year.

Callon Petroleum

Finally, rising crude oil prices give the shale oil industry a boost, too. Depending on the source, shale oil production becomes profitable when crude oil trades between $50 and $60 per barrel or higher. With current oil price in the high $60s and looking strong, investors once again turned towards shale oil producers.

Many of these companies still do not have the strength to compete. However, Callon Petroleum (CPE, $14.17) seems poised to take advantage of the stronger energy market. Nine in 10 analysts surveyed by MarketWatch hold buy ratings on the stock and as a group they target a 38% gain over the next year. That gives the stock a forward P/E of just over 15, which is in line with other, more mainstream energy stocks.

What is most important is that the market itself already caught on to Callon’s improved condition. The stock is up sharply since February and broke out to the upside from its own basing pattern.

Oil prices are firmer, and the fundamentals finally back them up. Energy stocks also show strength and good upside potential so there is something for everyone here. Also, with commodities in general poised to perform nicely this year, energy won’t be going it alone, either.

The U.S. is near full employment and global economies are in synchronized growth mode. That's going to make life trickier for income investors, as these trends will spark higher interest rates, which will weigh on bonds and classic dividend plays such as companies that sell toothpaste. Fortunately, there’s a fix: Buy energy stocks.

Many energy companies not only deliver sizable yields, but they now have potential to grow again as energy prices rebound, powered by these drivers:

Growing demand. Expanding economies use more energy. Americans are driving bigger cars. And in emerging markets, more people are joining the middle class. They’re naturally demanding energy-hungry basic amenities, such as cars and electric lighting.

Slowing supply growth. As oil wells age, production naturally declines by as much as 5% a year overall, says Jonathan Waghorn, who helps manage the Guinness Atkinson Global Energy Fund (GAGEX). This means energy companies must run hard just to stay in place. However, when oil plunged a few years ago, big energy companies pulled back investments in projects that take a few years to develop. The “air pocket” of missing wells in the pipeline will bite into supply growth soon. Meanwhile, U.S. shale production, while prolific, is growing less than expected, says Mike Breard, an energy analyst at Hodges Capital Management in Texas. Also, the Organization of the Petroleum Exporting Countries’ (OPEC) compliance on production cuts has been great, and that’s not likely to stop, Breard predicts.

Political instability. It’s no secret that oil comes from countries wrought with political instability – and not just Venezuela, Nigeria, Libya and Iraq. Oil recently jumped when Saudi Arabia’s Crown Prince Mohammad bin Salman (MBS) locked up rivals in a domestic power grab. Investors worried his maneuver could spill over into regional conflict. The MBS oil price move may fade a bit. But the risk of political conflict that disrupts supply won’t.

Here are seven energy stocks to buy that should benefit from these bullish oil trends, while paying you annual yields of between 2% and 9%.

Data is as of Nov. 13, 2017. Stocks are listed in alphabetical order. Dividend yields are calculated by annualizing the most recent quarterly payout and dividing by the share price. Click on ticker-symbol links in each slide for current share prices and more.

• Dividend yield: 3.7%

The starting point for anyone building an energy-sector dividend portfolio has to be Exxon Mobil (XOM, $82.89). This energy giant’s low cost of capital and savvy approach to building long-lived assets and reserves around the globe give it some of the best returns on capital in the business.

While Exxon Mobil lost its former CEO, Rex Tillerson, to the administration of President Donald Trump, it’s now in the capable hands of Darren Woods, who came up the ranks in the refining and chemical division. Under his leadership, Exxon Mobil recently announced it is spending $1 billion a year on green energy and biofuel research, though profitable breakthroughs may be years away.

More important to the here and now, Exxon has been investing more heavily “unconventional” shale plays in the Permian and Bakken, says Breard, of Hodges Capital Management. Since these wells can be brought online more quickly, this gives the company better flexibility to increase production when oil and gas prices rise. And unlike a lot of smaller exploration and production companies, Exxon Mobil isn’t just in upstream energy production – it has a huge presence in downstream refining and chemical manufacturing.

Together, these factors mean that Exxon Mobil generates strong and consistent cash flow even when oil falls – exactly what you want to see if you are investing in an energy company for dividends. Morningstar analyst Allen Good thinks Exxon can cover its dividend at oil prices as low as $40 per barrel. (However, a drop back to such levels seems unlikely.)

• Dividend yield: 6%
• BP (BP, $39.88) has a lot of debt. It’s still paying billions of dollars each year in fines for the 2010 Deepwater Horizon oil spill disaster in the Gulf of Mexico. And it’s selling off the family jewels to help cover these payments.If all of this makes you question the safety of the company’s 6% dividend yield, however, stop right now. BP announced a share buyback at the end of October, which is all we need to know about the dividend’s security. Companies don’t buy back shares when they are in danger of cutting dividends.

Thanks to cost discipline and higher oil prices, BP’s free cash flow has been growing substantially. Production grew 11% in the third quarter. Barring a sharp decline in oil, the company’s rich dividend yield is safe. By its latest estimate, BP has enough cash to cover capital spending and dividends when Brent crude oil is as low as at $49 a barrel. It recently traded for around $63.50 a barrel.

As for those Gulf of Mexico oil spill payments, they’re going to drop sharply to $2 billion in 2018 and a little more than $1 billion in 2019, from around $5.5 billion this year.

BP investors have the option of accepting dividends in “scrip,” or shares. Whether you take shares or cash is a personal choice depending on your cash flow needs and tax planning. But for some perspective, only about 20% of shareholders take stock.

• Dividend yield: 5.7%

Investor negativity on energy suggests money managers have vastly underweighted positions, says Jim Paulsen, chief investment strategist at the Leuthold Group. As fundamentals continue to improve, they’ll be forced to lift portfolio exposures, he says.

That will have them scrambling for the shares of companies like Royal Dutch Shell (RDS.B, $65.92).

Europe’s energy giant beat analyst expectations again in the third quarter, with a 47% increase in net profits to $4.1 billion. More importantly, for dividend investors, Shell continues to be a cash flow machine. Over the 12 months through the end of the third quarter, it produced $40 billion in operating cash flow (cash left over from operations, excluding capital expenditures and other investments). That was with Brent crude at an average of $51 per barrel – far lower than it is now. In contrast, dividends cost the company about $15 billion a year.

Shell also purchased energy firm BG Group in 2016, which gave it access to lower-cost assets, and the company subsequently targeted about $4.5 billion in merger-related savings.

Shell offers two share types: A-class American depository receipts, which fall under Dutch laws, or B-class ADRs, which fall under U.K. laws. Go with the B shares because you won’t have to pay Dutch withholding tax on the dividends.

• Dividend yield: 2.3%
• PetroChina (PTR, $70.20) is China’s state-owned exploration and production giant. The Chinese government owns 86% of its stock. For a lot of investors, that’s a show-stopper right there; they reason that PetroChina may exist to serve Chinese society as much as create shareholder value.

But there are advantages to being government-run. First off, PetroChina is a monopoly. The Chinese government restricts foreign companies from exploring inside its borders. This gives PetroChina an obvious leg up. Next, PetroChina owns the lion’s share of China’s oil and gas pipeline network, a cash machine. It’s spinning some of those pipelines off to raise capital, but maintaining a controlling stake. Abroad, PetroChina may get preferred access to energy reserves in countries where China’s government offers foreign aid, Breard says.

Besides, while investor sentiment on PetroChina has been negative – setting it up as a potential contrarian bet – there’s no reason to think it can’t benefit from higher oil prices as much as any company. To wit: PetroChina just posted a 291% increase in third-quarter profits at the end of October on a 17% increase in revenue, thanks to rising crude oil prices and cost controls. Despite the negativity surrounding this company, it’s reasonable to expect more of the same, if oil keeps moving higher.

• Dividend yield: 2.3%

Energy services company Baker Hughes sure came up with a clunky name when it merged with a portion of General Electric’s (GE) energy business last July. But the resulting company – Baker Hughes, A GE Company (BHGE, $31.88) – should be great for shareholders.

That’s because the company is under new management – and the business has plenty of room to improve. Baker Hughes has a “very long history of running its business poorly,” Morningstar analyst Preston Caldwell says.

Now it’s in the hands of Lorenzo Simonelli, an alum of GE, which prides itself in developing some of the best management talent in the world. This signals there’s a good chance Simonelli will work some magic, cut costs and boost profits. “We believe the upside is considerable,” Caldwell says.

Baker Hughes serves the booming U.S. shale sector, where growth will continue to be hot – especially if oil prices go higher. The company’s high-tech drilling and completion equipment will be in demand because it can carry out complex tasks, faster. “We continue to believe that our advanced drilling capabilities will differentiate us in the marketplace,” Simonelli told investors in the most recent conference call.

As an added plus, an insider recently purchased shares not too far below current prices. And the new Baker Hughes just signaled that it wants to play nice with shareholders – by launching a massive $3 billion share buyback which could eventually sop up 8% of its outstanding shares. This suggests the company will hike dividends regularly, too.

• Distribution yield: 8.6%

I love to follow insider buying to find ideas for my stock newsletter Brush Up on Stocks. Tallgrass Energy Partners (TEP, $44.19) first popped up in my system in May 2013, and I put it in my letter at $22.50. It now trades for more than $44. Nice returns, but there could be more to go because insiders still are buying.

CEO David Dehaemers Jr. has purchased $1.7 million worth of stock (technically called “units”) around current prices since August. CFO Gary Brauchle also was buying. In fact, insiders have done nothing but purchase shares all the way up since 2013. Continued buying on strength is a particularly bullish signal in insider analysis. Insider selling is less meaningful – and it’s not always a negative. But it’s worth pointing out there has been zero insider selling here in the past four years.

Tallgrass is an energy infrastructure company with two vast networks of pipelines called the Rockies Express Pipeline and the Pony Express spanning the country from Ohio to Colorado and Wyoming. They pipe energy from some of the most prolific oil and gas plays in the country, including the Marcellus, Utica Powder River, Bakken and Denver-Julesburg basins.

Tallgrass is a master limited partnership, which means there may be complications if you own it in tax-protected accounts. And MLPs definitely complicate matters at tax time. Technically, pipeline companies pay “distributions,” not dividends, because as MLPs, they are distributing profits to you without paying tax on them – one of the reasons yields are so high. As a result, investors who receive income from MLPs typically must deal with the additional K-1 form come tax time.

• Distribution yield: 5.8%

Pipeline companies pay such nice yields, it’s worth considering more than one for any energy sector dividend portfolio. Another one I’ve recently highlighted in my stock letter is Plains GP Holdings (PAGP, $20.88).

Investors soured on Plains GP this summer because it cut distributions due to problems in its supply and logistics business. But CEO Greg Armstrong, a director, and the general counsel were significant buyers in the weakness. They purchased $1.5 million worth of Plains GP units in August at around $21.50. Betting alongside insiders who challenge the market by buying weakness often is a winning tactic, and that should be the case here.

Plains GP may not get back to hiking distributions for a year or two. But it pays a nice distribution yield in the meantime, and you’re likely to see outperformance in its units as investors get more comfortable with the company again. That’s clearly what the insider buying suggests. The ace in the hole here: Plains operates pipelines and storage facilities that serve the Permian Basin – America's lowest-cost and most prolific shale basin, which should have years of growth ahead of it.

Brush has suggested TEP and PAGP in his stock newsletter, Brush Up on Stocks, as of this writing.

Buying energy stocks might feel like stepping in front of a Mack truck these days. Oil prices have collapsed, and major energy producers are playing a game of chicken as they pump at full throttle to try to drive weak producers out of business. Yet, with the sector deep in bear-market territory, share prices may already reflect much of the bad news.

For one thing, oil prices may have already bottomed. West Texas Intermediate crude, the U.S. benchmark, fell below $44 a barrel before rebounding to $52 in early February (at that price, it’s down 49% since last summer). But the market looks balanced between supply and demand. The world is expected to consume 92.4 million barrels a day this year, and the U.S. Energy Information Administration sees supplies touching 93 million barrels. That leaves scant spare capacity in case of a supply disruption. “Prices will go up, probably sooner rather than later, and people will be surprised at how fast they rise,” says Mike Breard, an analyst with Hodges Capital Management, in Dallas.

Kiplinger’s forecasts that oil will recover to $70 a barrel this spring. If we’re right, energy stocks are likely to post sharp gains. But even with oil in the $50 range, well-managed companies can make money. That’s certainly true of Chevron (symbol CVX, $110). Although the behemoth’s earnings plunged 30% in the fourth quarter, to $3.5 billion, its refining operations saw profit growth, offsetting weakness in the production side of the business. The company is spending billions each year to replace depleted wells and says it’s on track to boost oil-and-gas production by 21% by 2017. Chevron recently cut its capital budget and suspended share buybacks, but it has made protection of its $1.07-per-share quarterly dividend a priority. (Share prices are as of February 6.)

A stock with more potential (and more risk) is Chesapeake Energy (CHK, $21). Under former CEO Aubrey McClendon, the company acquired vast acreage throughout U.S. shale basins. Faced with a debt-laden balance sheet, current CEO Doug Lawler sold $5 billion worth of assets last year to shore up the firm’s finances, and he’s now focusing on improving profitability and buying back shares, says UBS analyst William Featherston, who recommends the stock. And if oil prices rebound to $80 a barrel, the stock will be worth at least $40 a share, says Tom Sudyka, comanager of the LK Balanced Fund.

Via Email: Energy Alerts from Kiplinger

Helmerich & Payne (HP, $68), an energy-services stock, has tumbled more than 30% in the past six months. The firm mostly provides rigs to land-based oil-and-gas producers. And although earnings rose 17% in the October–December quarter from the same period a year earlier, CEO John Lindsay warned that the results were “overshadowed by a rapidly deteriorating energy market.” Helmerich & Payne expects drilling activity and U.S. day rates for its rigs to decline sharply.

Yet Helmerich, the largest U.S. land driller, is likely to dig out of this hole and emerge stronger. The firm used the last downturn in oil prices to bolster market share from 9% in October 2008 to 16% at the end of 2014. Its land rigs are more profitable (on a daily operating basis) than those of major rivals, and its fleet is considered one of the most advanced and efficient.

On top of that, the stock yields a robust 4%. The company boasts a strong balance sheet and has ample cash to support the dividend. “The stock’s upside potential is much greater than the downside risk,” says Breard.