After a strong year in 2022, energy prices have been volatile for 2023. Oil is back under $80, after trending over $90 in the summer. Production cuts should have led to higher prices, but the world is getting more efficient at using energy.
However, while conventional energy is down, it’s not out. Dreams of a green energy revolution are taking longer to realize than initially thought. Oil stocks could still be big winners for investors in the years ahead.
That’s why investors still see opportunity in energy stocks. One activist investor, Elliott Investment Management, just took a $1 billion stake in Phillips 66 (PSX).
The refiner has had a tough year with oil prices trending lower. Earnings have slid 60 percent. Revenues are down too.
Nevertheless, shares are up 9 percent this year, just slightly behind the S&P 500. And trading at 7 times earnings, it’s an inexpensive play. Typically, refiner margins improve when oil prices trend higher. A few changes at how the company is run could unlock further value as well.
Action to take: Investors may like shares here as an overlooked energy play. Phillips 66 also pays a 3.6 percent dividend at today’s prices.
For traders, shares are in an uptrend and should see further gains in the months ahead. The February 2024 $130 calls, last going for about $3.35, could see mid-to-high double-digit returns.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.