The energy sector’s bullish phase is not showing any signs of slowing down. The energy index grew over 93% in the last 12 months, and its growth in 2022 so far has been 33.6%. Since we are only a quarter into the year, the current growth pace is slightly faster than the growth in the last 12 months.
This bullish phase has allowed many previously disregarded energy stocks to shine, and they have shown amazing growth spurts. But you have to be careful with those and naturally suspect their potential once the current momentum wanes. However, there are some no-brainer energy buys that you can hold long-term, and three of them should be on your radar.
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A new energy stock
Topaz Energy (TSX: TPZ) has only been around since November 2020. Since it has not yet been tested during an adverse phase for the energy sector here in Canada, its 59% growth since inception might not seem like a very fitting endorsement for Topaz as a long-term holding. But its growth has been very “measured” at a time when many comparable energy stocks (by market cap) were going absolutely berserk.
This should count for something. And if you add the royalty and infrastructure orientation of the company/business model, Topaz seems like a smart energy buy. Its business model is relatively unique, and though the risk might be slightly higher, the upside potential is equivalently enormous.
It’s currently focused on the Western Canadian Sedimentary Basin though it may expand its reach as its acquisitions start paying off.
A safe pipeline company
Pipeline companies like TC Energy (TSX: TRP)(NYSE: TRP) are considered relatively safer compared to other energy companies, especially upstream ones. However, TC Energy’s business model is not the only feather in the company’s cap. Its stock’s performance in the last decade reveals it to be a highly stable stock capable of weathering different kinds of headwinds.
It was one of the few stocks that recovered their 2014 valuation before the post-pandemic driven recovery. And it also didn’t experience rapid growth after the 2020 crash, which would have warranted an equally powerful correction in the future. It’s still trading at a price point quite near its pre-pandemic peak, which has contributed to the juicy 5% yield.
An industrial-oriented energy company
Even though it caters almost exclusively to the energy sector, TerraVest Industries (TSX: TVK) hasn’t suffered from its steady decline after 2014. It also didn’t experience the massive post-pandemic growth spurts that energy stocks, especially smaller ones, experienced, even though it’s a small-cap stock.
Its time-tested capital appreciation potential, reflected in its 1,110% growth in the last decade (equivalent to almost 100% appreciation each year), and its current attractive valuation make it a no-brainer energy stock you can buy right now. It also pays dividends, but the yield pales compared to its growth potential.
Foolish takeaway
The three stocks might also be considered slightly better choices compared to typical energy companies if you consider them through an ESG investing lens, mainly from an environmental perspective. TC Energy is heavily geared toward natural gas, the cleanest fossil fuel we have.
TerraVest has a water-heavy product/service portfolio, and Topaz is essentially a royalty company, so it doesn’t own energy assets directly.
