The year of 2019 has not been a particularly good one for energy stocks. At least, not for energy stocks that rely virtually exclusively on fossil fuels like oil and gas (forget about coal). One broad measure of how the sector is doing, the Energy Select Sector SPDR (NYSEARCA: XLE), is returning around 5% to investors so far in 2019, while the broad S&P 500 index is returning nearly 28%.

Oil and gas stocks track crude oil prices to a large degree. When crude oil prices are low, asset values decline along with revenues. This double-edged sword forces the energy stocks to choose between boosting their (currently low-value) reserves or keeping investors happy with dividend payments and share repurchases. Going into 2019, most energy producers chose to keep investors happy and kept capital spending low.

For 2020, most analysts are predicting more of the same. Estimates of next year’s crude oil prices are not really any better than current prices, even taking into consideration the recently announced production cuts from OPEC+. In its latest Short-Term Energy Outlook, the U.S. Energy Information Administration (EIA) actually expects prices for West Texas Intermediate (WTI) to drop from an average of $56.74 a barrel this year to $55.01 next year. Brent crude is forecast to slip from $63.93 a barrel to $60.51 in 2020.

Not a terribly rosy picture, but before you click the close box, we should point out that there are still some energy stocks, including oil and gas stocks, that are potentially undervalued going into the new year. Think of it this way: energy stocks, particularly those weighted heavily toward oil, may have been oversold, leaving plenty of headroom for growth in 2020.

Earlier in December, Thomas Hayes, chair of New York-based hedge fund, Great Hill Capital, told the Financial Times, “Investors have to think about the [exploration & production] subsector like a portfolio of high-yield junk bonds. While 10-15 percent may default and go bankrupt, the remaining 85-90 percent will dramatically outperform.”

There is one consideration that must be made before thinking “Value means automatic upside!” The rise of environmental, social and governance (ESG) investing is creating an entire movement that is completely ignoring and shunning anything tied to fossil fuels. That means that something may sound cheap at a theoretical eight times earnings, but that entire mountain of new capital heading into stocks will shun the group, even if the valuation were to drop to five times earnings. One recent update on the ESG front came from Goldman Sachs, when the firm announced a new target of $750 billion in sustainable finance initiatives with a focus on climate transition and inclusive growth for the coming decade. That’s not an outright exit of oil and gas, but it is just one more tell about where much of the investor interest lies for the coming decade.

While most of the market value in energy is still driven by oil and gas, there are some considerations within solar, renewable and alternatives that should be considered. 24/7 Wall St. has included one solar stock and two lithium-oriented companies due to the changes that are up and coming. Recent tax breaks for the biodiesel industry may also make other players more attractive for 2020.

Here are 10 energy stocks that are deemed as undervalued by the investment community for 2020.

Exxon Mobil

This is America’s largest oil company by market value, but the $300 billion market cap is way down from its glory days and is now only about 15% of Saudi Aramco’s. Exxon Mobil Corp. (NYSE: XOM) is also valued at close to 21 times a mix of expected 2019 and 2020 earnings, with roughly a 5% dividend yield. Up by a paltry 1% in 2019, the consensus price target of $78.36 implies upside of almost 12% from its current $70 share price, but its 52-week range of $64.65 to $83.40 shows how challenged it has been. Merrill Lynch is still incredibly positive about Exxon, so much so that one might wonder if the firm is just too positive.

Petroleo Brasileiro

The Brazilian oil giant known as Petrobras has added nearly 11% to its share price in 2019, but even so, its price-to-earnings ratio is under 13 and the implied upside is right around 28%. This company’s biggest problem is having its profits plundered by the Brazilian government, which owns a controlling interest.

Petroleo Brasileiro S.A. (NYSE: PBR) expects its equity value to rise by 45% by 2021, mainly through the spending reductions and the sale of noncore assets. Petrobras has forecast $75 billion in capital spending for the five-year period between 2020 and 2024, and about 59% of that will be directed to the company’s vast offshore pre-salt projects.

While Petrobras may screen as cheap internally and externally, any investor should keep in mind that Brazil’s state-ownership structure disadvantages the common holders in the capital structure far more than any traditional U.S. company.

Royal Dutch Shell

The Anglo-Dutch supermajor integrated oil company said earlier this year that it plans to become the world’s largest electricity producer by the early 2030s. The trick, of course, will be to replace a massive oil and gas business by acquiring scalable projects and companies to replace fossil-fuel revenues.

Royal Dutch Shell PLC (NYSE: RDS-A) has a hedge, of course: its production in the Permian Basin has risen by 80% this year and it is currently negotiating with privately held Endeavor Energy to acquire another 64,000 barrels a day of production. The stock is trading down about 3.4% for the year to date, at around $58.60, with an implied upside of nearly 30% to a 12-month price target of $76.03.

Occidental Petroleum Corp. (NYSE: OXY) is the poster child for energy’s bad year. The company’s $40 billion buyout of Anadarko sliced more than 40% from its share price this year. Warren Buffett put up $10 billion to help Oxy get the deal done and, in addition to 100,000 preferred shares with an 8% coupon, he received an option to buy 80 million ordinary shares at $62.50. With the stock now trading at around $38 a share, and a consensus price target of $50.36, the implied upside is around 32%, just over half the upside if shares reach Buffett’s strike price.

Oxy’s capex this year is right around $7.5 billion. The company is expected to cut that to $5 billion in 2020, nearly enough entirely to fund the company’s current $3.16 annual dividend. That said, there was a thought after the merger’s closing that perhaps Occidental should have just tried to give Anadarko back to its shareholders.

Parsley Energy

With a market cap of less than $6 billion, Parsley Energy Inc. (NYSE: PE) is considerably smaller than the other oil companies in this list, but it also has the distinction of having added 10% to its market value this year. In October, Parsley announced a $2.27 billion acquisition of Jagged Peak Energy, like Parsley a significant player in the Permian Basin. The deal is expected to close in the first quarter, and Parsley is expected to reduce capex by 14% next year while raising production by 10%. At a recent price of $17.84 per share and a consensus price target of $24.26, the implied upside in Parsley’s stock is 36%.

SunPower

SunPower Corp. (NASDAQ: SPWR) is the second-largest solar panel manufacturer in the United States, though it is a distant second. A total of 14 hedge funds held long positions in SunPower at the end of the third quarter, a sequential jump of 40%. The so-called smart money is long on alternative energy stocks as ESG (environmental, social and governmental) investing has become a “thing.” At a per-share price of around $7.90 a share, the implied upside for SunPower stock is 14%, based on a 12-month price target of $8.96.

Enterprise Products Partners

The attraction of master limited partnerships (MLPs) has always been their quarterly cash distribution to the limited partners. Enterprise Products Partners L.P. (NYSE: EPD), the largest of the bunch, pays the equivalent of a dividend yield of 6.43%. One of the weaknesses of MLPs is that they typically have a higher cost of capital than a corporation does. That weighs on another soft spot: MLPs have to grow in order to keep distributions growing. That implies debt, and Enterprise has plenty.

The company has a market cap of around $61 billion and long-term debt approaching $25 billion. Enterprise’s distributable cash flow coverage is right around 1.7 times, solid enough to withstand several shocks. The company’s stock opened the year at just below $25 and traded recently at about $28.30. With a 12-month consensus price target of $34.80, the implied upside on the stock is 23%.

Kinder Morgan

Unlike Enterprise, Kinder Morgan Inc. (NYSE: KMI) gave up its MLP designation several years ago to become a C corporation. Then the company made a few missteps. The $2 annual dividend in 2015 fell to $0.50 in 2016 and has come back to $1.00 in 2019. The company expects to post distributable cash flow of $2.2 billion this year (about $2.20 per share at the end of the third quarter), so the payout ratio is well under control.

In its outlook for 2020, Kinder Morgan said it expects to generate distributable cash flow of $5.1 billion in 2020 (about $2.24 per share) and announced an annual dividend for next year of $1.25 per share. For the year to date, Kinder Morgan’s stock has risen by nearly 30%, and the implied upside at a recent stock price of $20.50 is 7.3%, at a 12-month price target of $22.00.

Albemarle

The country’s largest supplier of lithium, Albemarle Corp. (NYSE: ALB) reached its year-to-date high of around $92 a share in February before dropping to below $60 in August. Since then the stock has bounced back to around $69. Over the past 12 months, the shares are down 14%.

Prices for lithium carbonate are down from their levels of a year ago, and the worse news is that supply currently outstrips demand even as electric vehicle sales pick up and demand for utility-scale battery storage increases sharply. The company forecasts a 21% compound annual growth rate for lithium demand through 2025, when total demand will reach 1 million metric tons. The stock recently traded at around $68.80, implying upside of almost 6%.

Livent

Like Albemarle, Livent Corp. (NYSE: LTHM) is in the lithium business. Since spinning out of FMC and coming public in October of last year, the company’s share price has fallen by nearly half. A lack of demand from China, the world’s largest market for lithium, has troubled the company. Livent is planning to carry over 4,000 metric tons of lithium hydroxide inventory into next year, and in early November announced a supply agreement with South Korea’s LG Electronics. The consensus price target on the stock is $9.44, implying upside of around 10% from a recent price of around $8.60.

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