The first half has come and gone, and it was another solid six months for stock investors. Every sector in the S&P 500 was up for the first half, with health care up 16% and technology up 14%, leading the way. One sector that definitely took it on the chin was energy, which was down 13%, and with good reason. Despite the OPEC and Russian production cuts, U.S. shale producers, particularly in the Permian Basin, continued to crank out supply.

With crude oil bouncing off the lows in the $42 a barrel range, and pushing back to $46.75 this week, that may portend more than just short covering. The rig count is dropping, and the heavy summer driving season is now in full swing. While taking big swings in energy may not be advisable, buying some of the large cap industry leaders may be.

We screened the Merrill Lynch energy research database and found four great stocks to add now rated Buy.

Chevron

This integrated giant is a safer way for investors looking to stay or get long the energy sector, and it has big Permian Basin exposure. Chevron Corp. (NYSE: CVX) is a U.S.-based integrated oil and gas company with worldwide operations in exploration and production, refining and marketing, transportation and petrochemicals.

The company sports a sizable dividend and has a solid place in the sector when it comes to natural gas and liquefied natural gas (LNG). Some on Wall Street estimate the company will have a compound annual growth rate of over 5% for the next five years.

The company reported solid earnings for the first quarter, and the Jefferies analysts have noted that the Permian Basin remains a key source of capital flexibility, and it is a key issue behind their relative preference for Chevron versus some of the other majors.

Chevron shareholders are paid an outstanding 4.06% dividend. The Merrill Lynch price target on the stock is $120, and the Wall Street consensus price objective is $121.39. The stock closed Monday at $106.30 a share.

Exxon Mobil

The world’s largest international integrated oil and gas company remains a top Wall Street energy pick. Exxon Mobil Corp. (NYSE: XOM) explores for and produces crude oil and natural gas in the United States, Canada, South America, Europe, Africa, Asia, Australia and Oceania. It also manufactures and markets commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics, and specialty products, and it transports and sells crude oil, natural gas, and petroleum products.

The company posted solid first-quarter results, and Merrill Lynch recently raised the stock back to a Buy rating, as the analyst feels it is an outstanding place for investors to put money, and Exxon is the firm’s top major idea now. The analysts also cite the ability of the company to maintain and cover the cash dividend with lower oil prices as a key positive.

With gasoline prices the lowest they have been in some time, motorists are expected to hit the nation’s highways in record numbers this year for the long holiday weekend. The stock is an excellent buy for investors looking to add energy to their portfolio but leery of the recent weakness in the sector.

Exxon shareholders are paid a 3.75% dividend. Merrill Lynch has a $100 price target for the shares, and the consensus target is $87.04. The stock closed most recently at $82.10 per share.

Energy Transfer Partners

This company merged with Sunoco Logistics Partners last year. Energy Transfer Partners L.P. (NYSE: ETP) engages in the natural gas midstream and intrastate transportation and storage businesses in the United States.

The company’s Intrastate Transportation and Storage segment transports natural gas from various natural gas producing areas, and through ET fuel system and HPL system. It owns and operates 7,500 miles of natural gas transportation pipelines and three natural gas storage facilities in Texas. Its Interstate Transportation and Storage segment provides natural gas transportation and storage services; owns and operates approximately 12,300 miles of interstate natural gas pipeline; and has interests in various natural gas pipelines.

The Midstream segment gathers, compresses, treats, blends, processes and markets natural gas. It owns and operates 35,000 miles of in service natural gas, 31 natural gas processing plants, 21 natural gas treating facilities and four natural gas conditioning facilities.

Energy Transfer unitholders receive a massive 10.3% distribution. The $28 Merrill Lynch price target is less than the posted consensus target of $29.57. The shares closed Monday at $20.82.

Halliburton

This company is still down almost 25% from highs printed last January. Halliburton Co. (NYSE: HAL) is one of the world’s largest providers of products and services to the energy industry. It serves the upstream oil and gas industry throughout the life cycle of the reservoir, from locating hydrocarbons and managing geological data to drilling and formation evaluation, well construction and completion, and optimizing production through the life of the field.

Halliburton is the second-largest provider of oil services and the number one player in pressure pumping services worldwide. For investors looking for an oilfield services company to add, this is arguably the best, and analysts feel it will be a huge benefactor as the frac market has tightened significantly and prices are 20% to 30% off the lows.

Halliburton shareholders are paid a 1.65% dividend. The Merrill Lynch price target is $48, while the consensus target is up at $59.52. The shares closed Monday at $43.72.

Valero Energy

This is a Wall Street and Merrill Lynch favorite. Valero Energy Corp. (NYSE: VLO) is the largest independent petroleum refining and marketing company in the United States. It is based out of San Antonio, owns 13 refineries in the United States, Canada and Europe, and has total throughput capacity of around 2.5 million barrels per day.

The stock has traded sideways since December, and with oil looking to trade higher and the busy summer driving season just around the corner, this may be an excellent play for growth and income portfolios.

Investors in Valero are paid a 4.17% dividend. The Merrill Lynch price target is a whopping $86. The consensus target is $74.17, and shares closed most recently at $68.02.

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These five large cap leaders still make sense with the energy sector badly bruised. With second-quarter earnings right around the corner, it may make sense to buy partial share positions here and see how the results come out.

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