Why I Like the Energy Stocks

This article first appeared on GuruFocus.

June 15, 2026 (Maple Hill Syndicate) Oil and gasoline prices will drop like a rock, President Trump has said.

When? As soon as the war is over.

How far? To where they were before.

I disagree, for several reasons. Some refineries, pipelines and storage facilities have been destroyed in combat, and will take a long time to fix. Governments see, more than ever, the need for strategic petroleum reserves, so they will be busy buying oil.

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And then there's the uncertainty premium. People who have seen $100 oil, and watched as Iran closed the Strait of Hormuz, will be uncertain about future oil supplies. Their nervousness will help buoy up the price.

So, even if the Iran war ends soon, I expect oil prices to bounce around between $80 and $90 for much of the next two years, rather than reverting to the $65 to $74 range of last year.

These are some of the reasons why I favor energy stocks, especially oil-and-gas stocks. Energy makes up only 3.5% of the Standard & Poor's 500 Index. My clients have about double that, and I may expand the energy weighting in their portfolios further.

Fossils?

Are fossil fuels, oil and gas, outdated? In a sense, are they fossils themselves?

Some people believe so, but I think they are confusing long-range forecasts with present realities.

According to the U.S. Energy Information Administration, oil accounts for about 38% of total U.S. energy consumption, and natural gas 36%. Throw in coal at 9% and you find that fossil fuels account for about 83% of all energy used in America.

Almost all of the rest is nuclear and renewable-source energy, including wind, solar and hydro.

My conclusion from these facts is that oil and natural gas will be significant energy sources in the U.S. for at least another decade.

Diamondback

One of my favorite energy stocks is Diamondback Energy Inc. (FANG), based in Midland, Texas. It drills exclusively in the Permian Basin, primarily in western Texas, an advantage at a time of worldwide geopolitical uncertainty.

Diamondback's profit was only about $1.7 billion last year, but that was a down year for the company. Analysts expect profit to jump to $5.6 billion this year. That's one reason 28 of the 31 analysts who follow the company recommend it.

TotalEnergies

Another favorite of mine is TotalEnergies SE (TTE), based in Courbevoie, France. In addition to being the largest oil company in France, it has large-scale operations in solar and wind energy.

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Currently, TotalEnergies generates about 34 gigawatts of electricity from solar and wind projects worldwide. The company says it hopes to raise that to 100 gigawatts by 2030. A gigawatt equals a billion watts, enough to power 750,000 to a million homes.

At 13 times earnings and 1.1 times revenue, I think TotalEnergies is attractively priced.

Exxon Mobil

For clients who prefer a conservative approach, I often buy Exxon Mobil Corp. (NYSE:XOM), the largest U.S. oil company. It has a strong balance sheet, with debt only 19% of equity. It has more than $8 billion in cash and cash equivalents.

Exxon has shown a profit in 29 of the past 30 years, the sole exception being 2020, when the pandemic reduced gasoline consumption.

The company has paid a dividend every year for the past 43 years, and increased the amount of the dividend every year. The dividend yield is currently about 2.8%.

Electric Revolution

U.S. electricity demand was nearly flat for more than a decade until 2021. Now it's growing, and some authorities estimate it will grow 20% over the next four years, as data centers, which are electricity hogs, come online.

The pie chart of fuel sources for electric power generation looks different than the one for overall energy use. Oil generates less than 1% of the nation's electricity. Natural gas generates about 41%.

Nuclear power is next, at 18%. Coal, despite environmental groups' opposition, accounts for about 17%. Wind is about 11%, solar 7% and hydroelectric 6%. Figures are again from the U.S. Energy Information Administration.

I think there are opportunities, from time to time, in each of these industries. I made some good profits in coal in 2024-2025, but have no investments there now. I'm mostly in oil and gas, but am looking for nuclear opportunities.

Disclosure: I own Diamondback and TotalEnergies for most of my clients. I own call options on SLB Ltd. (SLB), an oilfield services giant, personally and for a few clients.

One or more of my firm's clients own Chevron Corp. (CVX), ConocoPhillips (COP), Eco Wave Power Global AB (WAVE), Exxon Mobil Corp. (NYSE:XOM), Global X MLP & Energy Infrastructure ETF (MLPX), Halliburton Co. (HAL), TEMA Electrification ETF (VOLT) and Tourmaline Oil Corp. (TRMLF).

John Dorfman is chairman of Dorfman Value Investments LLC in Boston, Massachusetts. He or his clients may own or trade securities discussed in this column. He can be reached at [email protected].

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