Combat Energy Market Swings With These 3 Low-Beta Stocks

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Since the onset of the coronavirus pandemic, oil prices have experienced extreme fluctuations, underscoring the inherent volatility of the energy sector. Therefore, it is crucial to build a portfolio of low-beta energy stocks, as these securities can provide robust returns while offering protection against turbulent market conditions.

In this regard, stocks like HighPeak Energy Inc HPK, Vitesse Energy Inc VTS and Transportadora de Gas del Sur SA TGS are worth betting on.

Extremely Volatile Energy Market

We should not forget how oil prices have behaved since the initial coronavirus outbreak. The early pandemic period, when there were no vaccines, saw an environment of heightened uncertainties. The commodity’s price plunged to a negative $36.98 per barrel on Apr 20, 2020.

However, with the rapid developments of vaccines, which led to the gradual reopening of the economies, the pricing scenario of West Texas Intermediate crude improved drastically over time to reach $123.64 per barrel on Mar 8, 2022. Oil price data are per the U.S. Energy Information Administration. Oil is currently trading higher than the $75-per-barrel mark.

Low-Beta Energy Stocks to the Rescue

While the energy market is highly volatile, it will be better to consider stocks belonging to the sector that are less volatile than the market. For analyzing a stock’s risk profile, it is better to employ a statistical measure called beta — one of the popular indicators. Beta measures the volatility or risk of a particular asset compared to the market. In other words, beta measures the extent of a security’s price movement relative to the market. In this article, we are considering the S&P 500 as the market.

If a stock has a beta of 1, then its price will move with the market. Therefore, the stock is more volatile than the market if its beta is more than 1. In the same way, the stock is not as volatile as the market if its beta is less than 1.

For example, if the market offers a return of 20%, a stock with a beta of 3 will return 60%, which is overwhelming. Similarly, when the market slips 20%, the stock will sink 60%, which is devastating.

While employing our proprietary stock screener, we have zeroed in on three low-beta energy stocks that investors should bet on. The companies either carry a Zacks Rank #1 (Strong Buy) or #2 (Buy), and all have a beta lower than 1, which is our prime criterion for screening stocks. You can see the complete list of today’s Zacks #1 Rank stocks here.

HighPeak Energy is well-positioned to benefit from favorable crude pricing as the leading exploration and production company with a significant presence in the prolific Midland Basin in West Texas. This year, the Zacks #1 Ranked upstream energy player is expected to achieve earnings growth of nearly 21%.

Vitesse Energy has non-operated working and mineral interests in oil and gas assets, mainly across the prolific Bakken in North Dakota. Having interests in 6,932 productive wells, the #2 Ranked Vitesse Energy has secured a solid production outlook, assuming that the crude pricing scenario will remain extremely favorable.

Transportadora’s midstream asset portfolio has the most extensive natural gas pipeline network in Latin America. It generates stable fee-based revenues since its pipeline assets transport more than 60% of the gas consumed in Argentina.

Transportadora has witnessed upward estimate revisions for its 2024 bottom line in the past 30 days. The upward revisions are backed by the company’s stable business model and a strong focus on creating differential value for shareholders. Also, TGS, with a Zacks Rank of 1, has lower debt exposure than the composite stocks belonging to the industry.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Transportadora De Gas Sa Ord B (TGS) : Free Stock Analysis Report

HighPeak Energy, Inc. (HPK) : Free Stock Analysis Report

Vitesse Energy, Inc. (VTS) : Free Stock Analysis Report

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