5 Stocks to Energize Your Portfolio
Feb 14th 2012 10:22AM
Updated Feb 14th 2012 10:24AM
There's simply no denying how important energy is not only to our economy, but to our very existence. If we need it to live, your portfolio should have it, too. Below I've outlined five stocks to diversify an energy-less portfolio.
A solid bet: PetroChina (NYSE: PTR )
Increasing urbanization in China is driving demand for energy to unprecedented levels. It is estimated that by 2020, 16 million people will move from the country's rural communities to urban centers. PetroChina, ranked fourth on Platts' list of the top 250 energy companies, is doing everything it can to keep up.
Most recently, PetroChina inked a deal to secure a 20% stake in a Royal Dutch Shell shale gas project in Canada. Shell estimates the play contains 1 billion cubic feet of natural gas and has a production life of about 40 years.
The deal comes on the heels of another recent Canadian purchase, this one in the Alberta oil sands. PetroChina purchased the remaining stake in the MacKay River project from the Athabasca Oil Sands Corp., after holding a 60% interest since 2009.
The riskier move: SandRidge Energy (NYSE: SD )
SandRidge is as compelling as it is confusing these days. The company has a strategic position in two hot U.S. oil plays right now: the Permian Basin and the Mississippi Lime. SandRidge utilizes horizontal drilling, funded partially by royalty trusts SandRidge Permian Trust and SandRidge Mississippian Trust I, to pump black gold out of the middle of the country -- and the middle of the country only.
That is, until two weeks ago, when the company announced it was acquiring Dynamic Offshore Resources and getting into the Gulf of Mexico oil game. Herein lies the risk. A bet like this will either blow up in SandRidge's face or carry it to riches. Investors are already concerned about SandRidge's debt levels, and this acquisition -- though it helps deleverage the company on paper -- doesn't do much else to calm those fears.
The toll road: Enterprise Products Partners (NYSE: EPD )
I think the midstream game is one of the most compelling entry points into the energy game, and Enterprise has been one of the most consistent performers. Take a look at the company's performance over the last five years:
Though past performance is no guarantee of future success, Enterprise is moving full steam ahead in an industry that is exploding right now.
The company had a great fourth quarter, beating expectations on revenues and earnings per share. Revenue came in at $11.59 billion, and sales were up 21% year-over-year.
Looking ahead, the company has plans to develop an ethane pipeline to carry gas from the Marcellus shale to processing centers on the Gulf Coast. It is also expanding its natural gas liquids processing capacity in the Eagle Ford shale.
The tangential play: Dow Chemical (NYSE: DOW )
A chemical company seems a bit out of place on this list, but that's what tangential plays are all about. Dow buys the natural gas liquids produced by our favorite energy companies and converts them into all the chemicals, plastics, solvents, and resins we need to get by.
The low price of natural gas -- though a dagger for small natural gas producers -- is the greatest thing that ever happened to Dow Chemical. The company will build a cracker facility on the Gulf Coast with plans to begin operations in 2017. It will also reopen another cracker facility in Louisiana and build two new propylene plants.
The hedged bet: Total (NYSE: TOT )
French oil giant Total is one of the biggest energy companies in the world. What I like about Total, however, is its commitment to developing solar power, a hedge against traditional fossil fuels.
Total is the majority owner of SunPower, one of the Fool's top five energy stocks for 2012. SunPower makes the highest efficiency modules, the crucial factor that Fool solar expert Travis Hoium says gives the company an advantage over its U.S. and Chinese competitors.
SunPower recently closed its purchase of Tenesol from Total, uniting all of the parent company's solar components and reinforcing Total's commitment to alternative energy sources.
The energy industry offers a ton of options for investors looking to diversify their portfolios. If your portfolio is already chock-full of energy stocks (brilliant!) consider checking out 11 more ideas with The Fool's special free report "Secure Your Future With 11 Rock-Solid Dividend Stocks."