There’s no question that energy stocks have been some of the top performers this year. The industry lagged behind the rest of the market recovery. However, this year, with commodities prices rising and the demand picking up substantially, energy stocks have seen huge gains.
While most of these stocks still offer incredible potential; larger, more stable stocks such as Freehold Royalties or Suncor, likely won’t be doubling again as soon as this year.
There is still a place in your portfolio for top energy stocks like these. With that being said, though, if you’re looking for energy stocks that could double again by 2022, here are two slightly higher-risk stocks to consider.
A top natural gas stock
One of the best energy stocks to consider today, especially if you’re looking for major growth potential, is Peyto Exploration and Development (TSX:PEY).
Peyto is a slightly higher-risk investment, because it’s smaller and not necessarily integrated like Suncor or well diversified like Freehold. Nevertheless, it was still one of the top energy stocks I recommended to investors for 2021, as it’s a great investment, especially over the long term.
Peyto is one of the top energy stocks in Canada. The company is a natural gas producer — an industry that doesn’t face as many long-term headwinds as oil due to environmental concerns.
In fact, natural gas is much cleaner than oil and especially coal, which could make it a crucial commodity during the transition phase as we switch to clean energy.
And, by the way, Peyto isn’t just an ordinary natural gas producer. It’s one of the lowest-cost producers in the industry. This is a crucial advantage in the commodities industry.
When prices are low, Peyto can stay profitable longer than most of its competitors, and when they are rising, it will be one of the most profitable.
This is why it’s one of the top energy stocks to buy today. And because natural gas prices continue to rise, the company has a tonne of potential to keep up the considerable rally it’s been on.
Year to date, Peyto has gained 175% and nearly 300% in the last year. Even after this insane rally, though, it’s still trading undervalued, especially considering its long-term potential.
So, if you’re looking for a top energy stock to buy for the long run that could double again soon, Peyto is one of the best to consider.
A top energy services stock to consider
Another top stock to consider is Ensign Energy Services (TSX:ESI). Ensign is an energy services stock that offers drilling and well servicing, equipment rentals, oil sands coring, and more. It’s one of the largest and most technically advanced land-based drilling companies in the world.
The company has operations in eight countries, including Canada, the United States, Australia, and countries in the middle east.
When energy prices are falling, producers struggle financially. This leads energy producers to cut costs, which ultimately leads to lower sales for Ensign.
On the flip side, though, as energy prices recover, not only will these stocks once again have the cash flow for energy services, but they will actually need a lot of their services if they want to expand their production and take advantage of the rising prices.
This is why, as prices and the industry recovers, Ensign offers investors so much potential.
Year to date, it’s already up more than 130%, and there’s a lot more potential for Ensign to continue rallying — especially after a year where Ensign’s sales were significantly lower, many of its services should see a massive uptick in demand.
The company was worth $800 million just a few years ago at the start of 2019, with only double the sales it has currently. Today, it’s worth just $350 million.
So, as the energy industry recovers, and as Ensign continues to see a rapid increase in sales, the stock has a tonne of potential to double again this year.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Daniel Da Costa owns shares of FREEHOLD ROYALTIES LTD. The Motley Fool recommends FREEHOLD ROYALTIES LTD.