The Energy Trade Is Bigger Than Oil Prices: 3 Stocks to Buy and 2 to Sell

Why It Matters

The analysis highlights a durable, demand‑driven energy trade that could reprice key service providers, while exposing companies vulnerable to fuel‑cost headwinds, shaping sector allocation decisions for investors.

Key Takeaways

• U.S. rig counts rise as domestic energy investment hits $5 trillion
• ProPetro pivots fracking fleet to power AI data centers, boosting margins
• Baker Hughes' ROA ~15% vs GAAP 10%, fueled by LNG, geothermal
• Liberty Energy lands 1 GW data‑center power contract, still undervalued
• Royal Caribbean's 2026 fuel bill of $1.35 bn pressures earnings growth

Pulse Analysis

The surge in U.S. energy activity is rooted in a broader industrial renaissance rather than fleeting geopolitical spikes. Since 2022, American corporations have redirected roughly $5 trillion into factories, chemical plants, and AI data‑center infrastructure, all of which demand more oil, natural gas, and electricity. At the same time, the long‑standing buffer of drilled‑but‑uncompleted wells has evaporated, prompting the first rise in rig counts in years. This confluence of higher domestic demand and tighter supply sets the stage for a durable energy‑trade cycle.

Altimetry Research highlights three energy‑service firms that stand to capture the upside. ProPetro (PUMP) has leveraged its mobile generator fleet to supply long‑term power to hyperscale data centers, adding a high‑margin, recession‑resilient revenue stream to its traditional fracking services. Baker Hughes (BKR) benefits from its monopoly on rig‑count data and a diversified portfolio that now includes LNG equipment and geothermal drilling, with a true return on assets near 15% versus the GAAP‑reported 10%. Liberty Energy (LBRT) is scaling a similar power‑supply model, securing a 1 GW contract that could lift its ROA back toward the 20% levels seen in the 2022‑23 boom.

Investors should weigh the mispricing risk against the structural tailwinds. While the Energy Select Sector SPDR Fund (XLE) outperforms the broader market, individual stocks like ProPetro, Baker Hughes, and Liberty Energy remain below recent peaks, offering potential entry points. Conversely, companies such as Royal Caribbean and JetBlue face persistent fuel‑cost headwinds that could blunt earnings growth, making them less attractive in a sector where energy inputs dominate cost structures. The key will be tracking how quickly the market incorporates the new demand dynamics into valuations.