When it comes to energy stocks to buy before the bull market returns, natural gas and solar companies seem like the best bets for investors right now.
Natural gas prices have jumped to their highest point in many years in the United States, and gas prices are absolutely exorbitant in Europe. Meanwhile, the Democrats’ budget bill should tremendously boost the demand for solar modules. This means the best energy stocks to buy are those that will get big lifts from strong demand for natural gas and solar energy.
Further, oil prices seem to have stabilized. Over time, the proliferation of electric vehicles and less driving will negatively affect them.
Solar stocks and natural gas stocks, on the other hand, won’t be affected. Moreover, they are likely to benefit from the increased demand for electricity that EVs will spur.
With this in mind, here are three of the best energy stocks to buy before the bull market returns.
| LNG | Cheniere | $145.39 |
| SHLS | Shoals | $21.98 |
| FSLR | First Solar | $97.89 |
Cheniere (LNG)
As of July 25, the price of natural gas in the Netherlands had reportedly jumped to an astronomical $52, when measured in price per million BTUs. Meanwhile, natural gas prices in the U.S. on Aug. 4 were just $8.22.
The tremendous spread represents a great opportunity for Cheniere (NYSEMKT:LNG), which exports natural gas from the U.S. to European and Asian nations.
Indeed, illustrating the tremendous demand for American natural gas, The U.S. was the world’s top liquefied natural gas exporter in the first half of 2022. American liquefied natural gas exports jumped 12% versus the second half of 2021.
With the tensions between Russia and the European Union continuing to climb and EVs likely to increase the demand for electricity in Europe and Asia, the demand for Cheniere’s natural gas and the prices that it obtains for its gas should continue to be very high.
Despite Cheniere’s great opportunity, LNG stock is trading at a very attractive forward price-earnings ratio of just 8.
Shoals (SHLS)
Shoals (NASDAQ:SHLS) develops electrical components used in solar projects, and most of its business is in the U.S., although it has been looking to expand to Europe and South America. The company is well-positioned to benefit tremendously from the Democrats’ new budget bill, which looks likely to become law soon.
The legislation includes a significant tax credit of 7 cents per solar module, “multiplied by the capacity of the module.” Moreover, the bill would create a $30 billion production tax credit for solar energy projects through 2032.
Those provisions will make developing solar projects much cheaper in the U.S. This will enable Shoals to sell much more of its equipment and greatly boost its financial results.
First Solar (FSLR)
First Solar (NASDAQ:FSLR) already has a solar module factory in Ohio, and it’s building another, large solar module plant in the state. The latter facility will have a capacity of 3.3 gigawatts. As a result of its large U.S. manufacturing footprint, First Solar will uniquely benefit from the manufacturing tax credit.
Also noteworthy is that First Solar develops and builds solar power plants, and it has launched a significant number of them in the U.S. First Solar is likely to build many more highly profitable solar plants in America.
Additionally, the company’s global power plant business should get a big lift from the proliferation of electric vehicles. This is because EVs should raise the demand for and the price of electricity in many regions of the world.
On the date of publication, Larry Ramer held a long position in SHLS. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.