The energy sector is only that involves many activities, including but not limited to:

  • Exploration and production of oil and natural gas.
  • Their respective transportation.
  • The marketing of petroleum-based products.
  • The mining and processing of coal and other materials needed to generate electricity.
  • And the actual process of generating electricity.

Just by reading that list, it stands to no surprise that the energy sector is the world’s provider of many essential power sources and one of the economy’s more prominent players.

And, if you play your cards right, it can also be of great value to you as an investor.

Investing in the Energy Sector

As rewarding as the energy sector truly is, it also represents one of the most challenging investment opportunities out there. 

For starters, energy prices can change in a heartbeat without any previous notice. Such is the case we are dealing with now with the COVID-19 pandemic. Just to give one example, as air travel companies have had decreases in customers, jet fuel demand has staggeringly lowered. This led to many companies in the energy sector filing for bankruptcy.

So, to protect yourself from potential losses, you should try and apply the following strategies:

  • Don’t focus the entirety of your investments in a single company, nor on the entire sector. Try and maintain a diversified portfolio instead.
  • Look for companies that are the most unlikely to go out of business even at low points in the economy. Companies with low production costs, strong balance sheets, stable dividend payments and manageable capital spending programs are the limits to endure in any given situation.

Recommendations for your investment

To be of assistance, here are some companies that have proven themselves to be both profitable, capable of growth and strong enough to stand out the test of time:

  • ConocoPhillips

A diversified oil and gas producer with low costs of supply and strong balance sheets. Meaning it has enough of a safe space for any future harsh points it might encounter in the future.

  • NextEra Energy

One of the country’s largest electric companies. Even when facing low points, people will most likely need electricity to help the company manage themselves through any situation.

To give you an idea, the company has kept a steady pace even when facing the 2020 pandemic, as electricity demands have kept themselves stable.

  • TC Energy

One of the most notorious pipeline operators in North America. With a fee-based contract and regulate rates, they have always managed to maintain a low-risk business model. Even now, the company is working at a steady pace during the pandemic.

 

Understanding the risks

As with many other types of investments, this one shows a considerable amount of risk when under the influence of extreme outside situations. 

However, the need for energy sources is just too high in itself. If your company were to overcome the said type of situation, your profits would most likely skyrocket as people turn back to their suppliers. To see that occur, your priorities should lie in finding companies that have the capabilities of surviving downturns. If you have found a stock opportunity that fits that description, then your investment can rest assured.