Chevron and Devon Energy: two must-have energy stocks – Magic Post

The energy sector started 2025 with remarkable momentum, significantly outpacing the broader market. This impressive performance is reflected in the Energy Sector SPDR Fund NYSEARCA:XLEwhich was up 8.07% year-to-date as of January 16, far outpacing the S&P 500’s modest 1.39% rise. The sector’s strength is based on multiple factors, including rising oil prices, geopolitical tensions, and favorable political developments.

Energy sector outperformance in 2025

The early success of the energy sector in 2025 is driven by a combination of market dynamics and macroeconomic factors. Geopolitical tensions and expected sanctions, especially unrest in key oil-producing regions, pushed Brent crude prices up more than 5% in the first two weeks of the year. This rise was boosted by energy stocks that are closely linked to oil price movements.

In addition, demand expectations remain strong. Signs of economic recovery in major global markets and expected increases in industrial activity have created optimism about future energy consumption. Political shifts in the United States, which have encouraged fossil fuel investment and exploration, have also boosted the sector, increasing investor sentiment. These factors are in line with energy’s position as one of the most resilient and dynamic sectors heading into 2025.

2 energy outperformers to buy

A strong balance sheet and earnings growth fuel Chevron’s success

Chevron company New York Stock Exchange: CFXthe second-largest holding in the XLE ETF, has emerged as the best performer in 2025 so far. Thanks to a strong balance sheet, continued earnings growth, and a diversified portfolio, Chevron has gained 9.3% year-to-date, strongly outperforming its sector and competitors. The company maintains a forward P/E ratio of 14.45 and offers a dividend yield of 4.12%, making it attractive to both growth and income-focused investors.

Analysts have a positive outlook on Chevron, with a Moderate Buy rating and price target indicating a potential upside of 10.5%. Its upcoming earnings report on January 31 is expected to be a crucial catalyst, likely influencing its trajectory for the rest of the year. Chevron’s ability to outperform the sector and balance strong financial performance and industry challenges with a stable dividend payout makes it a top choice for investors seeking exposure to the energy sector.

Analysts rate Devon Energy a Moderate Buy with room for growth

Devon Energy New York Stock Exchange: Buriedwith a market capitalization of $24.2 billion, roughly ten times less than CVX, is another early standout performer in the sector. The company focuses on exploration and production in the United States, and operates thousands of wells in key areas such as the Delaware Basin and Eagle Ford. The innovative dividend policy, which combines fixed and variable components linked to free cash flow, provides a forward yield of 4.13%, with the potential for significant increases if oil prices remain high.

After a long-term downtrend that began in April 2024, Devon Energy has gained 17.5% year-to-date. This trend reversal, combined with the P/E as low as 7.12, indicates strong upside potential. Analysts maintain a Moderate Buy rating, with expectations indicating there is plenty of room for growth. The company’s sharp recovery and attractive valuation metrics position it as a potential leader in the sector for 2025.

Forecast for the energy sector

The energy sector’s strong start to 2025 reflects favorable conditions that could support continued momentum. The performance of the XLE ETF, supported by higher oil prices and sector-specific tailwinds, suggests further gains could be on the horizon. Additionally, major energy stocks like Chevron and Devon Energy show resilience and significant upside potential, especially when considering their impressive dividend yields.

Energy stocks offer compelling opportunities for long-term investors, balancing growth potential with reliable dividend income. While earnings reports and geopolitical developments will be crucial in shaping and sustaining the sector’s trajectory, current energy market dynamics and early performance suggest that 2025 could be a great year for energy-focused investments.

Before you consider Chevron, you’ll want to hear this.

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