Did you know an energy stock has returned more than 2,500% to investors in the last five years alone? Stick around to find out more.
These days, tech stocks seem to be always in the spotlight. You see them on the news, investors wait eagerly for their earnings report, and many finance YouTubers make videos that cover them—actually, I recently did one as well, and you can check it out here.
But, many investors forget that beyond the “Magnificent Seven,” new AI models, enhanced web development platforms, and improving chip designs, a slew of other industries are acting as foundations for the next big tech innovation. One of these is the energy sector.
Without energy, none of these advancements are possible. Insufficient or no power means no data centers for AI models, no semiconductor foundries, and no electric vehicles on the streams. So, while energy stocks don’t make headlines that often, it doesn’t mean they don’t offer attractive opportunities for investing.
So, let’s look at the top three energy stocks to buy for 2025.
Now, I won’t just show you the three top energy stocks and leave it at that. Being at the top of any sector isn’t something that happens forever. Things change, simple as that. So, before we get into the three stocks, I’ll show you how I selected them so you can do it yourself repeatedly, no matter how much the market changes.
Methodology in Finding the Top 3 Energy Stocks to Buy
So, for an energy stock analysis, we’ll start with – you guessed it – a list of energy stocks on the market. I keep several watchlists of different types of stocks. And now, I’ll screen the stocks from my energy sector watchlist by looking at their analyst ratings first.
Analysts are professionals who analyze companies from top to bottom. They know more about what’s happening to them than most investors, and it’s their job to know. So, I’ll trust their judgment and limit the results to only “strong-buy” rated companies.
Next is the number of analysts covering the stocks. I am biased towards having more data points that align with a particular conclusion. It makes me more confident of the results. So, I’m only looking at companies with strong buy ratings and over 16 analysts covering them.
Then, I’ll examine the company’s performance since the start of the year. I’ll set the year-to-date percentage change filter to 1 and greater, so only energy stocks with positive price movement will appear on the list.
I’ll also compare the stocks’ prices from today to five years ago to give us an idea of their previous performance. So, I’ll add the 5-year price change filter and set it to 150% and above. That’s roughly the same performance as the S&P 500 in the last five years.
I know you’ve heard of this before, but people always say past performance does not indicate future results. That’s true, but past performance is how all investments are sold.
So, with all that out of the way, I ran the scan with those filters and got five results. I arranged them from highest to lowest 5-year performance, and now, let’s talk about the top three.
Targa Resources
First up on the list is Targa Resources (NYSE: TRGP), a midstream energy company. Midstream in the energy business means Targa handles the gathering, processing, storage, and transportation of natural gas and gas liquids across North America. As such, the company builds and operates infrastructure to facilitate the gathering and transportation of energy resources.
Now, remember when I teased a company with a 2,500% return? Well, that’s Targa Resources. TRGP stock was trading at around $7 per share five years ago. Now, it’s at $190. That’s a whopping 2,500% return! On a year-to-date basis, TRGP is doing okay, with about a 7% improvement.
But here’s the thing. Given the stock’s meteoric rise, is it too late to buy now? I get that question a lot on my Discord server because every investor is afraid of buying stocks at the top and seeing their value go all the way down to the basement.
Thankfully, that doesn’t seem to be the case for Targa. Analysts rate the stock a strong buy with a high target price of around $246 or 29% above the current trading price. Targa Resources pays around a 1.5% dividend yield – based on its latest stock trading price.
Cheniere Energy
Next up is Cheniere Energy (NYSE: LNG). The company specializes in producing, storing, and exporting liquefied natural gas. Cheniere Energy exports facilities worldwide, including the Sabine Pass and Corpus Christi terminals, and help supply global markets with reliable and cleaner-burning natural gas.
Cheniere Energy started as an oil and gas exploration company in 1996 but pivoted to a full-service liquefied natural gas or LNG producer in 2016. In less than a decade, the company had joined the ranks of the top LNG companies in the world. But that’s what they say on the company website. Let’s see what its stock price says.
Around March 2020, LNG stock (yes, that’s its ticker symbol) was trading below $33. Today, it’s at $218, which means it’s up about 524%.
Imagine having a stock that quintupled in five years. Sure, LNG is only up between 1 to 2% year-to-date, but analysts hope things will improve in the short term. Of course, they rate LNG stock a strong buy with a $303 high target price, which reflects about a 39% upside based on current prices.
Cheniere Energy pays $2 in dividends annually based on its latest quarterly payout. That’s a less than 1% yield—a bit low, to be sure, but the returns more than make up for it.
Baker Hughes Company
As I said earlier, the popular sector never deserves attention alone. Also, never overlook the companies that provide infrastructure, support, and raw materials, as they always grow alongside the popular industry.
Case in point, and the last stock on my list: the Baker Hughes Company (NASDAQ: BKR). This energy technology company provides products, services, and digital solutions for other oil and gas exploration, drilling, and production. Baker Hughes delivers service to oilfields, including onshore, offshore, subsea operations, and other sources like hydrogen, geothermal, and renewables.
The company has returned more than 328% over the last five years, which showcases its ability to grow, adapt, and provide value to shareholders. It also pays the highest dividends on this list at around a 2% yield. Wall Street expects good things for BKR stock, giving it a 36% potential upside based on a $58 high target price.
Final Thoughts
With new technology both for and in demand for its services, the energy sector is evolving fast, and these three top stocks are showing the best prospects for a great 2025. However, the energy market can be volatile, so be sure to research before moving. You can also utilize all available resources, like Barchart and the Motley Fool, to guide your investment decisions.
What do you think? Are any of these stocks on your watchlist? Let me know in the comments – I’d love to hear your thoughts!
Disclosure: On the publication date, Rick Orford owned no stocks in this article.
