One Sector Is Crushing Everything Else in 2026 -- Here's the Best $1,000 Buy in It
Key Points
Energy stocks have had a strong year thus far in 2026, but good pockets of value still remain.
Genesis Energy could be set to benefit from more drilling in the Gulf area down below the border.
The energy sector has been red-hot in 2026, with the S&P Energy Select Sector index up nearly 25%, as of this writing. The sector has been buoyed by higher oil prices, stemming from the ongoing war with Iran and the closure of the important Strait of Hormuz.
However, if you're looking for an oil play not tied directly to the near-term direction of oil prices, one strong option is an under-the-radar master limited partnership (MLP) named Genesis Energy (NYSE: GEL). A $1,000 investment is a great place to start with this investment, which has some strong upside potential from here, but which carries a little extra risk given its current balance sheet.
Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue »
Let's dive in and learn more.
The offshore pipeline leader
Genesis began a major transformation last year when it decided to sell its underperforming soda ash business and use the proceeds to improve its balance sheet. It immediately retired high-cost debt and high-yield preferred units in a move that saved it considerable interest expense. It has continued to reshape its balance sheet this year, refinancing its debt to lower rates and continuing to repurchase its preferred units.
However, Genesis is much more than just a de-leveraging story. After the sale of its soda ash operations, the company's primary business is its offshore oil pipeline segment, which accounts for just over two-thirds of its operating profits. It also has a marine transportation business focused on refined products and a small onshore crude oil pipeline business. The offshore crude pipeline business, though, is its big growth driver.
The company's system, located in the Gulf area down below the border, ties into two large oil projects that came online last year: Shenandoah and Salamanca. It expanded its 64% owned CHOPS system and built its new SYNC pipeline to handle transportation for these two developments. Shenandoah is expected to produce 120,000 barrels a day, with the potential to reach 140,000 barrels a day, while Salamanca production is set to be around 60,000 barrels a day. Combined, about 65% of production is on take-or-pay transportation agreements.
Image source: Getty Images.
With Shenandoah and Salamanca now online, Genesis expects its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to climb 15% to 20% over its 2025 normalized EBITDA, which excludes the contribution from its exited soda ash business and assumes a normal hurricane season. It has no big capital expenditures (capex) planned for this year and had a 2.8 times distribution coverage ratio last quarter. It will use this excess cash to continue to pay down debt, as it looks to reduce its leverage from around 5 times to 4 times.
Genesis is an attractive turnaround story as it continues to de-leverage, backed by the strong cash flow coming from the Shenandoah and Salamanca oil plays. Offshore projects are long-term investments, and decline rates are much flatter compared to shale drilling. As such, if there is more drilling in the Gulf, given the spotlight the war has shone on the importance of oil to national security, the company is well positioned as a leading offshore transportation provider.
Geoffrey Seiler has positions in Genesis Energy. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.