The best oil stocks to invest in 2021

Investors are looking for the best oil stocks for their 2021 portfolios. Many economies around the world are heading for the recovery, but others are continuing their descent. Nonetheless, savvy investors see an opportunity during the economic downturn. Should you follow the trend and buy oil stocks as well?

To answer these questions, we’ll start by explaining the bullish outlook for oil stocks. Next, we will show some of the recommended oil stocks for 2021. Next, we will discuss the lingering risks for these investments. Most importantly, we’ll show you how to choose your stocks wisely.

Investing in stocks involves an awareness of the potential benefits and risks of each option. This is why we will explain the reasons why some are bearish or bullish on oil stocks. We will also show some of the recommended oil stocks this year. Nevertheless, you must study and choose your actions yourself.

Why more people are investing in oil and gas companies

The harmful impact of the COVID-19 pandemic goes beyond public health. More specifically, it has seriously disrupted the global economy.

The coronavirus has prompted governments to impose lockdowns around the world. As a result, countries have experienced widespread job losses and business closures.

It has also affected crude oil and natural gas companies. The pandemic has dramatically reduced car traffic around the world, so global demand for oil has fallen sharply.

As a result, stocks in the energy sector also fell drastically. However, some investors are eager to grab it while stock prices are meager.

In addition, they see the best oil stocks as underdogs. They believe oil stocks would rebound significantly once earnings generally decline.

On the other hand, skeptics believe some oil companies may not survive the pandemic. After all, the return to normal is uncertain despite the deployment of vaccines.

This means that investors may not receive a return on their investment for several years. In response, some ignore gas stocks and pour money into safer investments.

The main oil stocks to buy in 2021

The main oil stocks to buy in 2021

According to US News & World Report, 7 energy stocks are a great buy for this year. Some energy companies are rebounding with the economy.

For example, Pioneer of natural resources is supposed to effectively manage the market downturn. It could be a promising addition to your portfolio, but beware of the potential risks.

However, some investors are not very inclined to invest in the so-called best oil stocks. For example, they hesitate to Exxon Mobil due to its growing production problems.

Nevertheless, their future performance remains to be seen throughout the year. Here are some of the best oil stocks for 2021 recommended by US News:

1. Chevron Corp. (CLC)
2. Suncor Energy (SU)
3. Magellan Midstream Partners (MMP)
4. Enterprise Product Partners (EPDs)
5. TA (PA)
6. Chénière Energy (LNG)
7. EOG Resources (EOG)

Current risks to oil stocks

Current risks to oil stocks

After seeing the best oil stocks, you might be keen to invest immediately. However, you should be aware of the potential risks of these options.

As we mentioned, the coronavirus pandemic brings uncertainty to the oil industry. People are optimistic about recent vaccine deployments, but it’s unclear when normalcy will return.

If the economy does not fully recover quickly, it could hurt oil company profits. Eventually, investors may receive lower dividend yields.

Other external factors could damage even the best oil stocks. For example, oil cargoes can spill en route to their delivery destination.

One of the most well-known incidents was the Deepwater Horizon oil spill. Not only did this drop the British Petroleum (BP) share price, but it caused a colossal public relations disaster that lasted for many years.

However, you should not cripple your investment strategy because of the potential risks. You will have to face the possibility of failure no matter where you invest.

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How to plan your investments

How to plan your investments

Now that you know the best oil stocks, how do you invest? Should we trust Wall Street trends? Should you refer to the S&P 500 as a guide for your additions to your portfolio?

Even the most famous investors like Warren Buffett make mistakes. Some think he reads Wall Street like a book, but even the Oracle of Omaha could misinterpret the market.

On the other hand, the S&P 500 has its limits. Investors use it to assess the overall market, but it does not fully represent it.

How to invest then? Here are some tips for choosing stocks:

1. Research your options carefully – Learn about a business before investing. If it’s likely to grow in the future, you might want to invest.
2. Diversify your portfolio – Don’t just invest in the best oil stocks. Allocate funds to other types of investments to mitigate potential losses.
3. Compare the company with its competitors – You might find other companies in the same industry that have better growth potential.
4. Check if the company wins – If this is not the case, it is probably not advisable to invest.

Final thoughts

You can find plenty of recommendations online for the best oil stocks for 2021. However, you need to have a long-term investment strategy first.

Don’t just rely on short-term factors like rumors or oil prices. Instead, take the time to understand the industry and the business. It helps you choose the best oil stocks for yourself.

In addition to looking for additions to your portfolio, you should learn how to trade stocks online. Find out what tools you need to start investing, such as the latest trading platforms.

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Felix J. Dixon