JEasily one of the top-performing sectors for the first few months of this year, the best natural gas stocks to buy have suffered a conspicuous loss of momentum. Arguably, the erosion stems from global recession fears and subsequent governmental responses that wouldn’t be bullish for rising demand. Still, bold contrarian speculators may have an opportunity to enter the sector before it potentially gets bid up again.
First, let’s discuss the headwinds impacting the best natural gas stocks to buy. Primarily, the weight of rising inflation has hurt the dollar’s purchasing power and thus cutting into real household earnings. Subsequently, the Federal Reserve appears committed to tackling inflation at (almost) any cost. Further, the Biden administration is also committed, engaging in actions such as the release of crude from the Strategic Petroleum Reserve.
However, these measures which have obviously contributed to a decline in hydrocarbon energy prices may be only temporary. For the best natural gas stocks to buy, the focus is on Mother Nature. With the winter season coming up, the sector will likely rise.
As well, the military conflict in Ukraine means hydrocarbon production from geopolitically stable sources is crucial, boosting the narrative for the best natural gas stocks to buy now.
An independent hydrocarbon energy producer, ConocoPhillips (NYSE:COP) offers investors plenty of diversification, being one of the best natural gas stocks to buy while also flexing its muscle in the crude oil space.
However, over the trailing month since the close of Friday, July 8, COP shares have tanked nearly 23%. As I said earlier, though, this could spell opportunity for contrarian investors.
Recently, the Biden administration unveiled an environmental analysis for ConocoPhillips’ “planned $6 billion Willow oil and gas project in Alaska and outlined several options for the development, including not building it at all.”
Now, the debate is a fascinating one because President Biden can’t just appease the environmentalists within Democrat circles. Giving a flat no to domestic resource production is tantamount to giving the middle finger to the American public. That’s political self-harm.
Therefore, my speculation is a much more favorable ecosystem for COP, making it one of the biggest and best natural gas stocks to buy now.
One of the world’s biggest companies in the hydrocarbon space, Shell (NYSE:SHEL) has been the victim if you will of Russia’s paradigm-shifting invasion of Ukraine.
Per the New York Times, Russian President Vladimir Putin has moved to seize the Sakhalin-2 joint venture, of which Shell is a significant stakeholder. Of course, that’s a headwind for SHEL stock, which is down 12% during the trailing month since July 8.
However, Shell is also on the positive side of the news cycle. Recently, the company generated headlines when it announced the development of the Holland Hydrogen I facility. When it goes operational in 2025, per a CNBC report, it would be Europe’s largest renewable hydrogen plant.
Yes, the subject of this piece focuses on the best natural gas stocks to buy now, not hydrogen-related equity shares. Nevertheless, the news is significant because the Holland Hydrogen I facility diversifies Shell, making it both a hydrocarbon play as well as a lucrative idea for the renewable energy front.
EQT Corporation (EQT)
When it comes to the best natural gas stocks to buy specifically, no discussion is complete without talking about EQT Corporation (NYSE:EQT). While the company has always been a critical element within the broader U.S. energy infrastructure and security story, EQT has obviously garnered tremendous relevance following the Russian invasion of Ukraine.
As you know, the subsequent U.S.-led sanctions against Russia has effectively shelved a large portion of hydrocarbon energy supply flows. This crisis has been particularly painful to Europe, which has seen its policymakers scramble for alternative solutions. Unfortunately, green energy infrastructures will take time to develop.
Therefore, it’s encouraging that EQT has an ambitious plan to promote U.S.-sourced liquefied natural gas (LNG) exports. Per a report from NaturalGasIntel.com, “EQT is pushing to quadruple U.S. LNG capacity to 55 Bcf/d by 2030 to replace international coal at an ‘unprecedented pace’ and cut global emissions.”
Basically, if you want one of the best natural gas stocks to buy that’s relevant for our times, EQT is it.
Range Resources (RRC)
One of the most active natural gas drillers in Pennsylvania, Range Resources (NYSE:RRC) is a top producer for both natural gas and natural gas liquids. Also referred to as NGLs, these are hydrocarbons utilized in many sectors of the economy, including heating and cooking applications along with integration into vehicle fuel.
While even the best natural gas stocks to buy don’t necessarily command a reputation for responsibility, a strong corporate ethos is one of the hallmarks of Range Resources. In 2020, the company was a finalist for Observer-Reporter’s Best Place to Work award. As well, management has set a goal of net-zero emissions by 2025.
Over the trailing month, RRC is down about 19%, which may provide an intriguing entry point for contrarians. Range Resources features some strong profitability metrics, most notably an operating margin of 43.9%, substantially higher than the industry median of 6.23%.
Antero Resources (AR)
An independent natural gas and oil company, Antero Resources (NYSE:AR) focuses on the acquisition, development and production of unconventional natural gas resources. Billed as a pure-play operator in Appalachia, Antero aims to create value through the development of repeatable, low cost, liquids-rich drilling opportunities.
Among the features that make AR one of the best natural gas stocks to buy now is its integration. Specifically, Antero features a transportation portfolio and ownership of midstream networks through Antero Midstream (NYSE:AM). On its website, Antero Resources claims to be the most integrated NGL and natural gas business in the U.S.
Since the beginning of the year, AR stock has gained nearly 73%, a staggeringly high tally. However, in the trailing month, shares are down 28%, reflective of economic concerns along with the Biden administration’s efforts to reduce hydrocarbon prices. Still, the narrative for natural gas and NGLs is positive over the long run due to recent geopolitical paradigm shifts.
Coterra Energy (CTRA)
One of the smaller-capitalization plays among the best natural gas stocks to buy now, Coterra Energy (NYSE:CTRA) primarily engages in hydrocarbon exploration. Based in Houston, Texas, Coterra has operations in the Permian Basin, Marcellus Shale, and the Anadarko Basin.
Though the company might not have the wide footprint of many of its larger rivals, it makes up for it in terms of flexibility. Per its website, Coterra is a diversified energy firm, commanding the ability to adjust to weather industry cycles, pivoting between the best oil and natural gas assets in the country. Given the geopolitical environment we find ourselves in, hydrocarbon exploration will likely take on greater relevance in the years ahead.
Further, what’s particularly interesting about Coterra is that despite its size, the company enjoys robust financials. For instance, its net margin of slightly over 35% well exceeds the industry median of 3.3%. Better yet, CTRA is considered modestly undervalued against a basket of valuation tools.
Ring Energy (REI)
Headquartered in The Woodlands, Texas, Ring Energy (NYSEAMERICAN:REI) is one of the riskiest names among the best natural gas stocks to buy now. Specializing in the acquisition, exploration, and development of high-quality, oil and liquids rich assets in the Permian Basin of Texas and New Mexico, the growth-oriented independent energy firm has taken investors on quite a ride.
For instance, at the end of May of this year, REI stock had gained 70% since the beginning of January. Unfortunately, Ring Energy suffered a catastrophic loss of market value throughout June. Indeed, over the trialing month, REI hemorrhaged nearly 43%. Thus, on a YTD basis, the company is starting at a loss of 7%.
Still, what’s intriguing about Ring is that it has some solid metrics to back up speculative enthusiasm in REI stock. While its balance sheet could use some shoring up, Ring has an operating margin of 52.3%, which stands head and shoulders above the industry median of 6.2%.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.