At the end of 2011 some of our analysts picked five top energy stocks for 2012. Let me tell you, we could have done better. Not one, not two, not three, but all five of our picks have underperformed the S&P 500 as we pass the halfway mark. We have a lot of catchup to do if these are going to be the top energy stocks of 2012.
So what happened with these picks? I'll go through the big picture in order from best to worst performer on the year.
For a portion of the year, Kinder Morgan
I wouldn't give up on this pipeline company, though. It still sports a 3.9% dividend yield and a strong competitive moat and will benefit from the rapidly rising production of domestic energy.
As a company that offers services to drillers around the world, the slowdown in natural gas drilling in the U.S. has affected Schlumberger
Underlying all of this is the falling price of oil and the record low price of natural gas. With prices low, oil explorers cut back on drilling, which is bad for Schlumberger.
Let's keep this in mind, though: Earnings jumped 42% to $0.89 per share in the first quarter and drilling is still expanding around the world. Unless you think oil and natural gas will remain this low forever it might be a good time to pick up shares of this energy stock with shares trading at 15 times 2012 earnings.
My pick, SunPower
The solar industry has been ravaged by bankruptcies and a trade war in 2012 and SunPower is stuck in the middle of it all. The company's first-quarter earnings report was a positive surprise but that was overshadowed by First Solar's struggles and the falling price of modules coming from China. When the question of survival is even on the table, investors seem to run for the exits.
I still have a long-term view of SunPower and I'm not giving up on my pick. I'll admit that it's been a failure so far in 2012 but the solar story is far from over.
When energy analyst Dan Dzombak picked Ultra Petroleum
Natural gas producers are starting to cut back on drilling, shifting production to oil, but prices have yet to experience a meaningful recovery. For Ultra Petroleum that has led to one earnings miss in the last two quarters and falling estimates for this year and next. That's a recipe for a falling stock price until natural gas prices improve.
Coal has been crushed in 2012 and there doesn't appear to be any end in sight to the pain. Cheap natural gas and more stringent regulatory requirements are causing utilities across the country to shut down aging coal plants. These two factors have caused a major shift in where our electricity comes from. The amount of electricity coming from coal fell 19% in the first quarter.
Ironically, Peabody Energy
If any company emerges from coal's downturn victorious, I would bet on Peabody, but the stock as a value play has been the thesis for years. So far, it hasn't worked out well for investors.
Foolish bottom line
Our picks have been downright disastrous this year and as you can see, this has been driven by energy prices. We still have six months to go, though, and some of these picks have a lot of potential in the second half of the year.
For another top energy stock pick check out our report called "The Only Energy Stock You'll Ever Need." It highlights another strong energy stock that has outperformed four out of five of our picks this year. The report is free when you click here.