5 Stocks to Energize Your Portfolio
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: Schlumberger (NYSE: SLB)
The oil-field-services giant recently warned that the slowdown in U.S. natural gas drilling may have a negative impact on its bottom line this quarter. That being said, the long term picture for Schlumberger remains strong.
The company is as diverse as can be. With operations in more than 80 countries and a firm commitment to research and development, Schlumberger consistently creates products that are in demand the world over. Its seismic Q-technology is a billion-dollar business, and its HiWAY fracturing technique is used in the U.S. and Russia. On top of that, Schlumberger's strategic acquisitions only contribute to its R&D advantages, as it is more software- and technology-focused than asset-focused, like its competitors.
The riskier move: Kodiak Oil & Gas (NYSE: KOG)
This small energy outfit has made the most of the oil boom in the Bakken for the past two years. Kodiak has grown production 171% and revenue 226% over that time. The risk with Kodiak is the same for most of the smaller oil and gas producers. If something goes wrong, even if it's a change in the weather, the company can't mitigate losses with production from other assets -- because there are no other assets. If everything goes according to plan, however, the returns are quite nice.
Over the past 12 months, Kodiak's share price has increased more than 42%. Don't be surprised if this one keeps climbing, either. Management plans to bring on 51 net wells this year, and the target exit rate of 30,000 barrels of oil equivalent per day is double what it was last year.
The toll road: Plains All American Pipeline (NYSE: PAA)
Midstream companies tend to pique interest with their high yields, and Plains is no exception to that rule. With its stock's 5.2% yield and an annualized dividend of $4.10 per share, the company is compelling indeed. There is plenty to like beyond that, however -- Plains is growing fast, and the story keeps getting better and better.
Last November, Plains struck a deal with BP to buy its Canadian natural gas liquids operations. The $1.67 billion deal gave Plains 2,600 miles of pipeline, special gas extracting plants, and storage facilities.
The company is also teaming up with SandRidge Energy to bring a new 170-mile pipeline to the Mississippi Lime region, signing a deal to transport the oil back to the hub in Cushing, Okla. The new pipeline will have capacity of 175,000 barrels per day.
The tangential play: CSX (NYSE: CSX)
Natural gas may be killing coal, but railroads aren't suffering from the change. Though coal shipments are beginning to decline for CSX, shipments of hydraulic fracturing sand increased by 40% to 12,000 carloads in 2011.
All of the energy production in the Marcellus shale is driving the growth at East Coast railroads like Norfolk Southern and CSX. Norfolk Southern's total carloads to the Marcellus region rose an astounding 67% last year. Deliveries of pipe and drilling equipment, along with the increase in sand shipments, are fueling the growth.
The hedged bet:Chevron (NYSE: CVX)
Chevron is America's second biggest energy company after ExxonMobil, but the company's commitment to alternative energy makes it a great hedge against traditional fossil fuels. Chevron is the world's largest producer of geothermal energy. The company began its geothermal work in the 1960s in Northern California, and it's grown operations to include projects in the Philippines and Indonesia. Chevron's geothermal production in those countries has the capacity to reach 1,273 megawatts.
Additionally, Chevron sponsors the Cleantech Open, an annual competition geared to foster the growth of green technology companies.
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 nine more ideas with The Fool's special free report, "Secure Your Future With 9 Rock-Solid Dividend Stocks."