Best Energy Stocks for 2025: Investing in Energy

Review and Analysis

Overview

The extent to which the global energy industry is important for the overall global economy, is revealed by the fact that many economists use the value of natural gas and crude oil as an indicator and measure of the overall global economic health. This is no exaggeration as the energy industry and the global economy are closely linked.

Being so important, the energy sector is also a fast-paced one, which is rapidly reshaping and changing. The sector used to be dominated by the traditional oil and gas companies, while currently, it has witnessed a massive influx of new entrants, companies that deal with clean energy alternatives, such as solar energy, wind energy, and fuel cell technologies, all of which are revolutionizing the energy sector. The creation of the clean energy subsector and the subsequent transition of some of the old energy companies into the production of newer cleaner energy creates multiple opportunities for new and further investments, which hold great promise of proving really lucrative and fruitful. In turn, this creates an invigorated interest by investors across the globe to add energy stocks to their portfolios.

What Energy Stocks Are

The stocks of companies operating in the energy sector are collectively referred to as energy stocks. Besides companies producing traditional or renewable energy, the sector also includes power plants and utility companies. A rule of thumb is that if a company’s core offering, service or product, has to do with fuel or electricity, then the company is ranked as an energy company and its stocks are classed as energy stocks.

The biggest change witnessed by the sector in recent years has been the shift towards the generation of cleaner energy from natural resources, such as the sun and wind, which has led to the entrance of companies that deal with the production, storage and delivery of clean power, to the energy sector.

By the end of the guide, you should know the following:

• If Energy stocks is a good or a bad investment.
• How to buy Energy stocks.
• Where to buy Energy stocks.
• Which Energy share is best to buy now?.
• Energy stock price prediction: Where Will Energy stock Be in the next few Years?

Pros and Cons of Buying Energy stock investment

The Benefits of Energy stocks investment

It is not an unusual phenomenon for the stocks of energy giants to record impressive increases in their price and this has happened many times over the years. Thus, the energy sector poses as potentially very lucrative and attractive for investors, mainly due to some distinct advantages of the energy stock sector, such as:

• Since energy is a necessity for human and economic activity the energy sector is considered as very strong and having a solid future ahead. Investors in energy stocks may feel assured and confident that the demand for the products offered by energy companies, be they fuel for transportation means, or electricity for lighting or operating machines and appliances, will always be there and consumers will always use such products.
• Evaluating and assessing the value swings of energy stocks is fairly straightforward since the entire sector is largely centered around the prices of crude oil. Thus, the prices of energy stocks increase whenever crude oil prices rise and fall when crude oil devaluates. Moreover, energy both conventional and clean is a commodity and thus its prices are driven by demand and supply. Therefore, investors in the energy sector may well be in a position to predict the trends of the energy sector stocks by keeping up to pace with weather conditions and geopolitical developments which affect the demand and supply of energy products.
• Big gains are possible both for short-term traders, as well as buy and hold investors. This is attributed to the presence of large energy companies that had often produced impressive yields and dividend payouts. This is especially true with companies operating in the utilities and energy infrastructure subsector. Additionally, the volatility that is often present in the energy sector causes price swings that create great opportunities for short-term gains as well, provided investors learn the causes of such swings and are able to predict them and quickly react when they occur.

Things we didn't like in Energy stocks investment

If you are attracted by the positives of the energy stocks sector, it is advised that you also consider its disadvantages before proceeding to add energy stocks to your investment portfolio. Such downsides, do exist and mainly pertain to:

• Increased risk for sudden losses due to high volatility. The energy sector is relatively highly volatile, meaning that energy stocks may exhibit sudden and high swings in value. This means that investors in energy stocks may find themselves suffering big losses before they have any time to react. Volatility tends to be higher for the stocks of traditional oil companies as well as clean energy companies. If you want to invest in the energy sector, but would prefer to be exposed to less volatility and risk, then you should prefer the stocks of the utility and energy infrastructure companies instead.
• The energy stocks are vulnerable at times of economic or supply chain crises. The recent pandemic has led to an overall economic crisis and problems in the supply chain for energy. The two combined have meant big losses of established energy companies and those were reflected in their stock prices. Though the energy sector is certain to recover and rebound eventually, when exactly this will be achieved is unknown, while further declines may be possible if additional economic and supply difficulties emerge.
• Becoming stocks of diminishing returns is a possibility for traditional energy stocks. Investing in the stock of traditional oil and gas companies carries an added risk for investors if these companies don’t adequately and effectively move towards cleaner energy production, as increased environmental threats render this shift a necessity. Obviously, this will benefit companies on the clean energy side of the sector, but traditional companies may well face huge losses if they fail to keep up and differentiate their offering.

Where Can You Buy Energy stocks

There are several online sites and platforms where people from across the globe can buy Energy at good exchange rates and with low or no transaction fees. To aid your quest we have comprised a list of some of the most popular Stock Trading platforms to buy Energy sector's shares from and your strongly advised to consult this list before making your first purchase of or investment in Energy industry.

Features to Look in Energy stocks

Key Factors to keep in mind when investing in Lesser-Known Energy Stocks

Investing in large, well-known companies in the energy sector may not be possible or desirable by many investors, since their stock prices are usually already steep. Lesser-known companies in the sector may be more attractive to invest in, as their stock may be acquired for less, while lucrative opportunities may be easier and easier to attain. However, venturing to invest in lesser-known energy companies will come with a great level of risk associated, so if you do decide to go down this lane, pay attention to the following smart tips:

Do not invest in a company unless it is actually already producing a product.

As other sectors, the energy sector does include many small companies, whose stock prices are very low, but which in essence amount to very little. Such speculative ventures attract capital from investors by showcasing big plans to tap into energy reserves and are basically selling nothing robust but simply intentions and promises. Usually, they are never able to actually achieve what they declare and such companies may fail even before drilling or may face severe problems during drilling or uncover reserves that cannot be marketed due to low quantity or excessive cost. Investing in such a company will only leave investors suffering great losses, so make sure you stay away from highly speculative schemes.

Do not invest in a company unless you have thoroughly checked its Financial Data.

Already producing oil or some other energy product or related technology is not a guarantee that the performance of this company is adequate to render it viable and profitable as a venture in the long term. Especially since the energy sector often faces high volatility, a strong balance sheet is the first thing you should be looking out for. Thus, prior to making an investment into a lesser-known energy company make sure to do your research and carefully study its financial data, specifically looking out for the net cash received from its operations, as well as the total cash and cash equivalents it holds.

Do not invest unless the company is truly profitable or nearing that

Many newly established companies in the energy sector may not survive to reach profitability given the high costs involved. Achieving profitability is difficult and those who actually make it have good prospects. Thus, check the net earnings on a company’s balance sheet and only invest in those who are already in profit or well on the way to achieving this.

Do not invest unless the company is somehow involved with clean energy

Though crude is not fading out as of yet, the persistent trend towards cleaner energy is bound to gradually lead to decreased demand for crude oil and thus affect the stock prices of traditional energy companies. This is why most companies are already transforming and entering the clean energy sector as renewable energies are the future. Existing companies that fail to change their operations and business model accordingly and cannot keep pace with the clean energy revolution by becoming part of it, will certainly face great long-term losses. Thus, it is better to invest in energy companies that are already into clean energy either entirely or at least partially.

Future Outlook for Energy stocks

Is now the right time to invest in renewable energy stocks?

The answer is definitely not no, but a little short than a resounding yes. The industry’s outlook is promising and its future appears bright, however, investors should not be expecting a linear growth pattern, nor anticipate that all energy stocks will fare equally well. As the world is recovering from the pandemic, the leading energy sector stocks are forecasted to exhibit lukewarm growth levels in the next three years or so. To maximize the chances for success of your energy sector stocks investment make sure you make smart and wise decisions on which energy companies you will choose to invest in.

Risks of Investing in Energy stocks

Tips on How to Invest in Energy stocks and Make a Profit

There is no guarantee that you will make a profit when you invest in Energy. However, to give yourself the best chance possible we have hand-picked the three most valuable such strategies, which you can find below:

• Tip 1: Set your own specific Financial Goals
• Tip 2: Dollar-Cost Average Your Energy Investments
• Tip 3: Diversify Your Energy Investment

Overall Conclusion – Final Thoughts

The energy sector is certain to continue to grow and evolve, albeit towards the cleaner energy path. Placing your investments wisely on energy companies with the right credentials may well mean that big gains are possible. However, not all energy stocks are the same, and not all carry the same prospects. If you are new to trading and investing or even new to the energy sector, it is best that you tread with caution and base your decisions on careful study of facts around a company, such as its profitability, production capacity, business model, and healthy cash flow. Smart, wise, and educated investment decisions in energy stocks will also require you to closely monitor trends in the energy sector, as well as related developments in the overall economy.

In this guide, the aim wasn’t only to answer simple questions like “how to buy stocks of the Energy sector?” or “where to buy Energy stocks?”. Instead, the goal was to equip you with the relevant knowledge and insight to be able to see and understand the bigger picture as well as make your Energy stocks investment journey as successful and as profitable as possible!