
Each January, MoneyShow.com asks the nation’s top financial newsletter advisors for their favorite stock picks for the year ahead. For 2019, six experts look to the energy sector for their growth and income favorites.
Tony Daltorio, Growth Stock Confidential
The Chinese are finally serious about curbing the rampant pollution in their country. That has led to China markedly cutting back on the use of coal for both power and heating purposes. As a substitute for coal, China is placing a major emphasis on natural gas.
The all-of-a-sudden big increase in natural gas demand has had almost immediate effects, particularly on the market for liquefied natural gas. The International Energy Agency forecasts China’s natural gas demand will rise upward of 4% a year through 2040, boosting LNG prices over the long-term.
Despite the trade war, this bodes well for the number one exporter of LNG from the U.S. — Cheniere Energy. It had the first U.S. LNG export terminal, which has been in operation since early 2016.
As of the end of 2018, more than 500 cumulative cargoes have been exported from its SPL Project, with deliveries to 30 countries and regions worldwide. And by the end of 2020, Cheniere will be a top-5 global provider of LNG with a production capacity of 27 million tons annually once all six trains are built and online.
Cheniere’s first-mover advantage in China is evident with the signing of a major long-term contract with a major Chinese firm. Cheniere had been selling LNG cargoes on a spot basis to China since 2016.
This is the first ever long-term contract to supply China with U.S. liquified natural gas. This will be a long, profitable relationship between Cheniere and China. In my view, Cheniere — a conservative idea for 2019 — is a buy on any weakness from trade war worries.
Tim Plaehn, The Dividend Hunter
My top aggressive stock pick for 2019 is Antero Midstream GP LP this is an energy midstream services company in transition. The company came to market with a May 2017 IPO. The assets at that time were general partner incentive distribution rights — IDRs — for an ownership interest in high growth, midstream MLP Antero Midstream Partners.
The MLP was sponsored and controlled by Marcellus natural gas producer Antero Resources. Complicated, multi-publicly traded entity structures were the vogue in the energy sector until energy commodity prices and energy sector stock prices crashed in 2015-2016.
In 2017 and 2018, the MLP sector and their sponsor companies have announced simplification events to hopefully make the resulting business structures and forecast results more appealing to investors.
On October 10, 2018 the Antero companies announced a simplification transaction that will close in the first quarter of 2019. The transaction involves Antero Midstream GP acquiring all the Antero Midstream Partners units, and then changing its name to Antero Midstream and using the AM stock symbol.
The effect of the transaction will be to turn the current Antero Midstream Partners into a C corporation and the elimination of the IDRs paid to the general manager. This means starting at some point in Q1 in 2019, the current Antero Midstream GP, which derives its revenue from the IDR payments, will change into a high dividend growth midstream services provider.
Antero Midstream will be a roughly $10 billion market cap energy midstream company focused on natural gas gathering and compression for Antero Resources in the Marcellus and Utica Shale plays.
The company also provides wellhead water services (freshwater delivery and wastewater takeaway) and owns one take away natural gas pipeline. Currently, about 65% of EBITDA is from gathering and compression, with the remaining 35% from water services.
With a mid-teen share price at the end of 2018 the market isn’t close to factoring in the higher dividends for 2019 and the future dividend growth prospects. Antero Midstream GP evolving into the new Antero Midstream is one of my highest conviction total return prospects for the next three years.
Tap here to read MoneyShow’s Top 100 Stock Picks for 2019!

Kelley Wright, Investment Quality Trends
Crude oil, and by extension oil companies, were taken out and shot last year. Nevertheless, one of my top picks for the coming year is ExxonMobil. Okay, so ExxonMobil is a massive company that isn’t very nimble, which makes sense when you’re talking about the equivalent of an aircraft carrier.
What ExxonMobil is: It is competent and manages vast assets with an eye always toward the future. I don’t see a recession on the horizon, let alone a depression, which ExxonMobil is priced at currently.
Economies sometime take a pause, which is normal and healthy. Also, unless there is some viable economic alternative to fossil fuel coming I’m not aware of, the world will continue to run on energy.
ExxonMobil’s historically repetitive high-yield is 3.0%, which at the current cash dividend of $3.28 is realized at $109 per share. Trading recently at just over $69 per share with a dividend yield of 4.75%, the stock is an outstanding long-term value.

George Putnam, The Turnaround Letter
As a more speculative idea, my pick for this year is Midstates Petroleum. The company is a small-cap oil and gas producer recently emerged from bankruptcy and now has a nearly debt-free balance sheet. Its board members collectively represent over 38% of the company shares.
The tight-fisted new leadership has pared spending to the point where it is approaching break-even free cash flow. The company’s hedges offer it some protection from the recent drop in oil prices.
As a potential buyer of oil fields, low oil prices should reduce the prices Midstates might pay for future acquisitions. Currently trading at 2x EBITDA, Midstates looks poised for a strong rebound in the coming year.
Resources overall had a tough 2018. Interestingly, it was at a time when the U.S. was living a strong economic boom. Energy shares have been harder hit, and they’re extremely bombed out, especially when compared to crude oil itself.
Moreover, the energy boom in the U.S. is poised to continue as the U.S. has become a net exporter of crude oil for the first time ever.
Denbury Resources is a resource company with 97% of its business derived from the production of crude oil and its derivatives. It was trading above $6 just a few months ago and has fallen sharply with crude oil’s decline. It’s now below $2.
Any pick up in the price of crude will surely push Denbury Resources back to more normal valuation levels. Our price target for the stock during the first quarter of the year is $2.75-$3.
Zach Jonson, Stack Financial Management
Chevron is one of the world’s largest integrated energy companies with exploration, production, and refining operations that span the globe. The company has its hands in all aspects of the energy life cycle including upstream, midstream and downstream/chemical operations which gives them the ability to navigate the ever-changing commodity environment.
Chevron’s high-quality assets allow for strong profit growth and free cash flow generation in a wide range of oil price environments, making them an ideal holding for 2019.
As we stand today, Chevron is on track to produce multiple years of positive free cash flow (FCF) driven by recently completed major capital projects. The completion of these projects allows Chevron to reduce capital spending over the next few years while still maintaining the ability to ramp up production.
From a valuation standpoint, shares are trading at 12.9 times 2019 EPS estimates, which is well below the 10-year average of approximately 15 times. From a cash flow standpoint, Chevron provides investors a forward FCF yield in excess of 6%, which coupled with a 3.9% dividend yield, offers investors ample return to offset possible oil price volatility.
In a sector dominated by highly cyclical investment opportunities, Chevron is a true high-quality story. The company is a well-managed, cash-oriented firm that offers strong production growth when most peers are struggling to lower costs.
Chevron offers investors the ability to maintain exposure to the volatile energy sector while still maintaining a “safety-first” mentality. (Note: Clients and individuals associated with Stack Financial Management hold positions in, and may from time to time make purchases or sales of this security.)