During our climate-defined era, the interplay of energy stocks and weather patterns continues to shape investment prospects in the sector. This month, we’re looking at three opportunities uniquely positioned to leverage current environmental conditions.
As heat waves sweep across California, wildfires lurk on the horizon and oil demand surges, these investment vehicles offer opportunities to tap into the energy landscape.
From resilience in safeguarding infrastructure against wildfires, robust prospects in the face of bullish oil market trends and broad exposure to the energy sector amidst severe weather events, these are the best energy stocks to buy in July.
Edison International (EIX)
Southern California utility company, Edison International (NYSE:EIX), presents a compelling investment opportunity for July in light of the current heatwave conditions throughout the region.
Californian weather forecasts indicate prolonged high temperatures and an increased risk of wildfires and heat-related illnesses in July. The increased demand for reliable utility services due to the heat wave could mean a revenue jump for Edison.
Furthermore, the company has reduced the probability of catastrophic wildfires associated with its equipment by about 75%-80% since 2018, demonstrating substantial operational progress in managing wildfire risks. This move shows Edison’s commitment to the community, goodwill and resilience amidst the persisting heatwave conditions.
Aside from short-term protection, the company’s newly submitted three-year Wildfire Mitigation Plan will pay dividends down the road. The company strives to strengthen the grid by installing covered conductors and more underground power lines in high-risk areas. This long-term infrastructure focus will serve Edison, California residents and shareholders well over time.
Despite its dividends, Edison remains a quality stock for income investors, having consistently performed by increasing its annual dividend yearly since 2004. With a respectable 4.2% trailing yield, EIX is a solid energy stock for investors seeking steady income.
Occidental Petroleum (OXY)
The current forecast for global oil markets and consumption presents an optimistic outlook for American oil firm Occidental Petroleum (NYSE:OXY). OPEC’s recent production cut extension will likely apply upward pressure on crude oil prices. Expect impacts in late 2023 and early 2024, as crude oil forecasts average $79 per barrel and $84, respectively.
Furthermore, analysts predict a global fuel consumption rise of 1.6 million daily barrels in 2023 and 1.7 million in 2024. That forecast could be a substantial tailwind for OXY’s operations and profitability.
Beyond oil markets, the “Buffett effect” has given OXY an air of investor confidence as Berkshire Hathaway consistently buys company stock whenever prices dip below $60. Warren Buffett’s significant stake of nearly 25% of the company’s shares suggests strong faith in OXY’s future performance.
Despite market volatility and relative unpredictability, OXY’s strong foundation and investment backing make it a promising energy stock in July.
Energy Selector Sector SPDR Fund (XLE)
Severe heat and weather events throughout the United States are poised to heavily impact energy markets in July. For investors aiming to capture the broadest range of opportunities, the Energy Selector Sector SPDR Fund (NYSEARCA:XLE), offers a strategic approach.
XLE provides comprehensive exposure to the energy sector. XLE recreates the Energy Select Sector Index and holds all energy stocks in the S&P 500. This broad exposure offers multiple advantages for investors. It mitigates the individual company risks associated with a single-stock portfolio. At the same time, XLE allows investors to tap into the potential of the entire energy sector.
This exposure could prove particularly advantageous in extreme heat and weather events as industry segments react differently to these conditions. Investors can better navigate risks and opportunities by investing in a diversified ETF like XLE.
On the date of publication, Jeremy Flint held long positions in EIX and OXY. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.