These 5 Energy Stocks Hedge Inflation With Growth Potential

Key Points

• Energy stocks have traditionally been used as an inflation hedge, passing rising costs along to consumers more effectively when compared to non-essential services. 
• While traditional hedges may sacrifice growth potential to remain a store of value, select energy stocks may be poised for price increases lasting through inflation bumps. 
• After a year of negative returns, energy companies with solid fundamentals like ConocoPhillips, Diamondback Energy and Coterra Energy could provide investor opportunities.

As U.S. inflation rates heat up again, investors are scurrying to store assets in traditional hedges. One of the most consistently well-performing sectors in environments of high inflation is energy, which has beaten inflation 74% of the time between the years 1973 and 2024. 

 With an annual real return of almost 13% on average, it’s easy to see why investors are once again turning to energy stocks to combat rising prices. However, the trade-off to hedging inflation with energy stocks is usually lower rates of portfolio growth. These five unique energy stocks buck this trend, combining hedging potential with massive analyst-anticipated upsides.

Tons of Potential Upside for ConocoPhillips

Multinational energy company ConocoPhillips NYSE: COP has had a rough year. Its share prices have shown a downward trend since April of 2024, with shares trading about 13% below pricing the same time last year.

Operating revenue fell from 2022 to 2023, as did profits, contributing to the steady decline.  

Despite these recent struggles, analysts remain optimistic about ConocoPhillips long-term. It maintains a solid Buy rating, with a consensus price target of $133.56 per share.

This represents a potential upside of more than 38% — and with the company trading close to its 52-week low, now could be the right time to snatch up this energy stock. 

Diamondback Energy Trades Low With 37% Analyst Upside

Diamondback Energy NASDAQ: FANG is another energy stock facing a dip in investor interest. Down 12.5% since last year, the stock is currently trading at close to a 52-week low.

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It also missed its most recent earnings estimate by $1.24 per share, leading to another drop in share price seen after earnings were released in November.

Short interest and analyst data present a positive future, regardless of recent negative headlines.

Short interest fell by 12.42% since last month, indicating a sharp increase in investor confidence — likely attributed to increased inclusion in hedge funds like Lord & Richards Wealth Management. Analysts forecast a 37.06% potential upside for a consensus share price of $215.17 per share. 

Petrobras Brings the Heat With 10% Dividend Yield 

If you’re looking for international energy exposure, consider Petróleo Brasileiro S.A. NYSE: PBR. Steadily declining earnings have caused Petróleo Brasileiro (“Petrobras”) to see declining share prices since March — but this high-payout pick could mean opportunities for investors with higher risk tolerance. 

Petrobras currently maintains a Moderate Buy rating from analysts, with a 27.17% potential upside predicted by analysts. In particular, this energy service provider is notable for its sky-high dividend yield of 10.39%.

While this means it pays out 23.06% of its cash flow as dividends, a recently announced discovery of fresh oil in the Buzios field could potentially support a rally without cutting payouts. 

Coterra Energy Enjoys Trend of Rising Share Prices

Unlike the other energy picks on our list, Coterra Energy Inc. NYSE: CTRA hasn’t produced a negative return for one-year investors. Instead, share prices have been up 11.61% since last year, providing investors with optimism while still leaving room for growth.

Analysts predict a 21.33% potential upside, with a consensus price of $33.42 per share. 

In addition to positive price trends, short interest and dividend increases may also act as future predictors of success. Short interest on the stock is down more than 15% since last month, indicating a sharp increase in investor confidence.

While this stock’s dividend yield is modest at 3.05%, its respectable 23.59% annualized three-year payout growth could make it a strong long-term pick. 

Buffett Favorite OXY Offers Reward Potential 

For a more risky energy play, consider Occidental Petroleum NYSE: OXY, which is trading near a new 52-week low. While analysts give this stock a tentative Hold rating, they also pair it with a 28.24% potential upside. 

This optimistic valuation could be related to recent decreases in share prices, which came after institutional investors like Rhumbline Advisers and Strategic Financial Concepts announced share reductions.

Company fundamentals remain solid despite reductions, including a P/E ratio of 12.53 and an annualized three-year dividend growth rate of more than 180%. Warren Buffett holds 27% of OXY shares.

These factors could make OXY a dividend and energy pick to watch.