We recently compiled a list of the Jim Cramer’s List of 7 Energy Stocks for the Trump Trade. In this article, we are going to take a look at where Sempra (NYSE:SRE) stands against the other energy stocks.
Jim Cramer, the host of Mad Money, recently shared his views on the future of the natural gas and oil sectors under President-elect Donald Trump’s administration, alongside a majority Republican Congress. Cramer expressed his belief that companies involved in the natural gas ecosystem will thrive as a result of this new political landscape. He pointed out that the United States is rich in natural gas resources, which can be produced cheaply.
While some may believe the country’s position in terms of natural gas production is lower than expected, Cramer noted that, due to the Biden administration’s unfriendly stance toward fossil fuels and a weaker global economy, the natural gas industry had underperformed for much of the year. However, Cramer is optimistic that this trend will soon shift. He emphasized that although the U.S. has vast natural gas reserves, there has been a lack of infrastructure to effectively transport the resource, a problem exacerbated by the Biden administration’s resistance to new pipelines.
This, according to Cramer, has hindered the industry. He specifically criticized the pause on new liquefied natural gas (LNG) export authorizations, calling it a stunning setback for one of the country’s strongest sectors, which provides thousands of high-paying jobs. He went on to say:
“The betting is that Trump’s going to undo that on day one, giving new life to all these LNG projects that really have been stuck in limbo.”
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Since the election, natural gas prices have surged more than 70%, although Cramer noted that this increase was partly driven by a cold snap after a warm fall and the delayed start to winter.
“Seasonally, this is a good time for the commodity but I also think there’s some optimism about the future of the industry driving this move.”
Cramer then shared his broader outlook, saying:
“But here’s the bottom line: We’re hearing about all sorts of Trump trades right now, and many of these things have made insane moves in less than three weeks, to the point where, actually, they’re feeling precarious to me.”
He went on to recommend natural gas as a more sustainable investment, emphasizing that while many sectors have already surged in the wake of the election, natural gas stands out as an industry with long-term potential. Cramer believes that with the incoming administration’s supportive stance toward the fossil fuel sector, the natural gas ecosystem will continue to thrive for years to come.
He suggested that investors should look to buy into producers, pipeline companies, and LNG export stocks, all of which he believes have further upside potential now that the regulatory environment has shifted.
“I bet they keep running for the next couple of years, not months. They have all moved but they’re nowhere versus where they could go now that Biden’s anti-fossil fuel team has been broomed for one that is totally supportive of this industry.”
Our Methodology
For this article, we compiled a list of 7 stocks that were discussed by Jim Cramer during a recent episode of Mad Money. We listed the stocks in ascending order of their hedge fund sentiment as of the third quarter, which was taken from Insider Monkey’s database of 900 hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A power transmission tower with a desert sunset in the background, symbolizing power and energy.
Sempra (NYSE:SRE)
Number of Hedge Fund Holders: 33
Cramer mentioned that he likes Sempra (NYSE:SRE) and highlighted its diversified portfolio.
“I also like Sempra, which is a more diversified power company but has plenty of nat-gas exposure through regulated gas utilities in California, big nat-gas pipeline network that helps bring gas to Mexico. Can you believe that they need our natural gas after being so big in it? But they haven’t done any of the infrastructure. It’s also got a growing portfolio of LNG export facilities in both the US and Mexico. This is another name that’s broken out since the election, straight up actually, also up 15%. Now I would be a little more cautious. I’d buy some and then wait for it to come down.”
Sempra (NYSE:SRE) is an energy infrastructure company that provides electric and natural gas services, manages electricity transmission and distribution, and develops energy infrastructure to support the global energy transition. Recently, the company reported its third-quarter earnings, with adjusted earnings reaching $566 million, or $0.89 per diluted share. This compares to $685 million, or $1.08 per diluted share, reported in the same period of 2023.
The company also made significant progress in expanding its energy infrastructure. It announced the expansion of the GRO pipeline, which is expected to begin commercial operations before the end of this year. This pipeline is designed to support liquefied natural gas (LNG) exports at the Energia Costa Azul (ECA) facility. In addition, Sempra Infrastructure’s Port Arthur LNG Phase 2 development is advancing ahead of the Cameron LNG expansion in Louisiana.
According to Sempra’s (NYSE:SRE) CFO, Karen Sedgwick, the Port Arthur project in Texas is moving faster due to a continuous construction agreement with Bechtel that spans both phases of the project. While talks are ongoing for LNG purchases and equity agreements related to the Port Arthur project, Sedgwick noted that the timing for finalizing the financial go-ahead for the Cameron expansion remains uncertain.
However, the company has growing confidence that the non-Free Trade Agreement export permit for Port Arthur Phase 2 will be received early next year. CEO Jeffrey Martin further emphasized that they expect to secure the necessary permits for Port Arthur Phase 2 within the first half of next year.
Overall SRE ranks 5th on Jim Cramer’s list of energy stocks for the Trump trade. While we acknowledge the potential of SRE as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than SRE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.