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

Key Points

• U.S. rig counts are rising for the first time in years, driven by reindustrialization demand and lingering supply disruptions from Middle East conflict—not just an oil price spike.
• ProPetro, Baker Hughes, and Liberty Energy offer picks-and-shovels exposure to the oil and gas investment cycle, each with an added power generation angle tied to AI data center demand.
• Royal Caribbean and JetBlue face structural margin pressure from elevated fuel costs that the stocks may not yet fully reflect.

Energy stocks have been on a tear, but not every name in the sector is telling the same story. Rob Spivey and Joel Litman of Altimetry Research believe the market is misreading what's driving the move, and more importantly, which stocks are positioned to benefit.

U.S. rig counts are rising for the first time in several years. After a prolonged period of decline, when domestic oil production was depressed enough that shale drilling simply wasn't profitable, energy companies are putting new rigs in the ground. Spivey and Litman argue this isn't a knee-jerk reaction to geopolitical tension. It's the acceleration of something structural that was already in motion.

The backdrop goes well beyond Iran. Since roughly 2022, U.S. corporates have redeployed an estimated five trillion dollars into domestic hard assets—factories, chemical plants, supply centers, and infrastructure that requires significantly more energy to run. Tariff pressures are pushing more manufacturing onshore. AI data center construction is accelerating. All of it demands more oil, more natural gas, and more power.

On top of that, a years-long inventory of drilled but uncompleted wells—known as DUCs—has largely been drawn down. The buffer the industry relied on to avoid new drilling is nearly gone. The geopolitical disruption in the Middle East, including damage to LNG infrastructure in the Gulf region, didn't create this dynamic. It just pulled it forward.

The result: Energy Select Sector SPDR Fund NYSEARCA: XLE has outperformed the S&P 500 year-to-date in 2026 by a wide margin, even as individual names remain well off recent highs. That gap, Spivey and Litman argue, is exactly where the opportunity is.

The Fracking Fleet That Became a Power Grid

ProPetro Holding NYSE: PUMP is a completion services company, the kind of business that steps in after the hole is drilled, handling fracking, cementing, and everything needed to bring a well online. It's been a difficult operating environment for that business over the past few years as activity slowed and the DUC supply cushioned demand.

ProPetro responded by redirecting part of its generator fleet toward something more immediately lucrative: powering AI data centers.

The company's ProPWR division has signed long-term power supply agreements with hyperscale data center operators, with contracts that can extend up to a decade. That stable, high-margin revenue stream is already showing up in the numbers, and it's changing how investors should think about the business. ProPetro is no longer purely tied to the oil and gas drilling cycle.

The setup gets more interesting from here. As new rig construction accelerates, demand for completion services tightens while ProPetro's available fleet is already partially committed to data center contracts. Spivey sees that supply constraint driving day rates higher—a meaningful tailwind on top of the power revenue already coming in.

The market is currently pricing the company's return on assets at 5-10%, according to Altimetry's uniform accounting analysis. Spivey's view is that the combination of data center demand and an oil and gas investment cycle could push that figure significantly higher—and the stock remains off recent highs, representing a better entry point for a company the market hasn't fully re-rated yet.

The Name Behind Every Rig in America

If ProPetro is a specialist, Baker Hughes Nasdaq: BKR is everywhere. The rig count data the entire oil and gas industry watches weekly? Baker Hughes publishes it. The LNG liquefaction equipment needed to rebuild Middle East export capacity and expand U.S. LNG exports? Baker Hughes is one of the only suppliers.

The drilling hardware, completion tools, and subsea systems that underpin virtually any increase in global energy investment? Baker Hughes is involved.

The company also has exposure to geothermal energy development—a growing area where the drilling expertise that defines oilfield services directly translates into drilling holes for heat extraction. Baker Hughes made a strategic investment in geothermal-focused Baseload Capital and has been building out that side of the business.

On a uniform accounting basis, Altimetry estimates Baker Hughes' actual return on assets is closer to 15%—more than double what standard GAAP metrics suggest. The market is currently pricing it at around 10%. Spivey sees that gap closing as LNG infrastructure rebuilding, U.S. energy investment, and the broader power build-out run through Baker Hughes' order book.

The stock has pulled back from recent highs, which Spivey characterizes as the market overreacting to Hormuz-linked oil price concerns rather than reassessing the company's structural position.

The Completion Powerhouse the Market Hasn't Caught Up To

Liberty Energy NYSE: LBRT is the largest completion services provider in the United States—bigger than ProPetro, and executing an almost identical strategic pivot. Its Liberty Power Innovations subsidiary is now operating as a distributed power provider, signing agreements with data center developers to deliver long-term, utility-scale power directly at the site.

The deals are substantial. Liberty has announced a one-gigawatt power development agreement with Vantage Data Centers and a 330-megawatt reservation with a separate data center developer for a Texas expansion.

These are long-duration contracts with large counterparties, a very different earnings profile than the shorter-cycle completion work that defines traditional oilfield services—and the market hasn't caught up. Litman points out that when the last oil and gas investment spike hit in 2022-2023, Liberty's return on assets climbed to roughly 20%. Today, the stock is priced as though that level is permanently off the table.

With frac capacity tightening due to equipment attrition, power contracts locking in durable revenue, and a new drilling cycle potentially accelerating, Spivey sees the thesis playing out faster than most expect—and showing up in earnings quickly, given how rapidly shale activity translates through the supply chain.

The Headwind Royal Caribbean Can't Raise Prices to Outrun

Not every company gets a tailwind from rising fuel costs.

Royal Caribbean Cruises NYSE: RCL has executed a strong recovery since the pandemic lows. Litman gives the company full credit for that. But at current valuations, with shares trading around $285 after falling from above $360, he argues the stock still embeds expectations for increasing profitability over the next several years.

Fuel is one of the largest operating expenses for a cruise line, and Royal Caribbean projected a $1.35 billion full-year fuel bill for 2026, with elevated prices creating a meaningful per-share earnings headwind.

Litman's concern isn't that Royal Caribbean is a bad company. It's that the stock prices in upside that elevated fuel costs, along with a consumer that's increasingly cost-sensitive, make it difficult to deliver. For investors eyeing the pullback as an entry point, he'd counsel patience.

The Airline That's Great for Passengers and Brutal for Investors

JetBlue Airways Nasdaq: JBLU is a different kind of problem. Unlike Royal Caribbean, JetBlue never fully recovered from 2020-2021. On a uniform accounting basis, return on assets went negative during the pandemic and has remained negative, while most other airlines have returned to profitability.

The collapse of Spirit Airlines has given JetBlue a short-term boost as traders anticipate market share gains, and the stock has bounced.

But Litman frames that as a catalyst masking deeper structural issues: JetBlue delivers a product that competes with premium carriers in quality while pricing closer to budget carriers, a combination that's good for consumers and structurally challenging for margins.

Add persistent fuel-cost headwinds, and the stock's 70%+ decline from five years ago still doesn't make the current price compelling in his view.

The Trade Behind the Trade

The energy sector selloff is a reaction to headlines. The picks-and-shovels setup Spivey and Litman are describing is a response to something more durable: the convergence of industrial reinvestment, AI infrastructure buildout, and years of underinvestment in domestic energy capacity. The companies getting paid to build that infrastructure are already collecting revenue. The question is whether the market prices that in before or after it shows up in the numbers.