Hot Picks: Three U.S. energy stocks tied to AI demand and LNG exports

Energy is leading gains on the S&P 500 this year, prompting a closer look at where opportunities remain. Stock selection is becoming a greater focus after the sector’s strong performance.

BNN Bloomberg spoke with Rob Thummel, senior portfolio manager at Tortoise Capital, about his three U.S. energy selections and how he assesses their growth prospects, financial strength and risks.

Key Takeaways

• Thummel says AI electricity demand is helping accelerate Entergy’s growth rate toward six to eight per cent, potentially higher as development continues.
• Opposition to new utility facilities and concerns about rising electricity rates remain potential obstacles to the power infrastructure buildout.
• Energy Transfer offers a yield of about seven per cent, with Thummel anticipating roughly five per cent payout growth and describing recent segment weakness as transitory.
• Elevated European natural gas prices and low inventories could support Cheniere Energy’s earnings and opportunities for additional long-term contracts.
• Cheniere’s volumes are more than 95 per cent booked through 2030, according to the interview, while Thummel considers annual dividend growth of 10 to 15 per cent feasible.

Read the full transcript below:

ROGER: All right, time for Hot Picks, and the energy sector is leading gains on the S&P this year. Our next guest has three U.S.-based energy plays he believes have some room to run. Let’s bring in Rob Thummel, senior portfolio manager at Tortoise Capital. Rob, thanks as always for joining us.

ROB: Yes, good morning.

ROGER: Okay, let’s get right to it. Entergy Corporation.

ROB: Yeah, Entergy. Well, well, if you — if you like AI, you like electricity. Electricity is the foundation for AI and its future development. Entergy is right in the centre of all of that. Entergy is a large utility located in northern Louisiana. It’s supporting some of the Meta projects in northern Louisiana. You know, it’s why we like Entergy at Tortoise is because its growth rate is accelerating, right? It used to be very low growth rate for utilities in general, two to four per cent. Now Entergy’s, you know, approaching six to eight per cent, maybe even higher than that going forward, as AI development continues to require a significant amount of electricity.

ROGER: And what kind of potential tailwinds do you see for it, and maybe headwinds?

ROB: Yeah, the tailwinds are all about development of new — of AI and AI development and AI applications. You know, the headwinds could be, you know, there’s a big headwind with regards to, you know, nobody wants these electric utility facilities in their — in their backyards, and they don’t — and they — and then — or they don’t want rising rates, basically rising electricity rates. And so I think Entergy’s done a pretty good job of insulating the consumers, especially in their territory and of northern Louisiana, from rising rates tied to the buildout of electricity that they need to do to support AI development.

ROGER: Okay, Energy Transfer.

ROB: The Energy Transfer. What we like about Energy Transfer at Tortoise is, you know, when you look at the energy sector, a lot of things have done really well this year, as you highlighted. And — but as we look forward, and, you know, where do you want to be positioned going forward? We think you need to be potentially a little more selective and not as focused on the commodity-sensitive type of names like an Exxon and Chevron, but more so names like an Energy Transfer that own a really — an unreplicable network of energy infrastructure assets, which allows companies like Energy Transfer and others to effectively pay high dividend yield. So Energy Transfer’s dividend on its stock is seven per cent or so. It’s probably going to grow that dividend five per cent, and so that’s a good head start, we think, for any stock in — in a market that we, you know, it’s unpredictable about what’s going to happen next year.

ROGER: All right. Any concerns about its leverage that’s above peer average and its capex?

ROB: Yeah. Good question. Not really capex. They’ve been pretty disciplined on their capex. Their leverage is — has been coming down, frankly, and so we really like how the company is positioned from sustainability of its dividend, but also the growth potential of its dividend. You know, they’re building some of the more essential pipelines, too. They are spending some capital, but these are growth projects. These are — the management team has proven to that they underwrite these great projects, a couple of which are going to be some pipelines into Arizona to support electric generation and actually the manufacturing industry as well and industrial activity in — in Arizona as well.

ROGER: And they’ve had some segment-level underperformance. Just looking at some of the notes here, NGLs and refined product segment missed.

ROB: Yeah, yeah, that’s — I would — I would say that’s probably just transitory. I would — I would say if you look at — if you — if you want a energy infrastructure name and you want some high income with some growth, you know, Energy Transfer’s got to hit track record of delivering that.

ROGER: All right, let’s check out Cheniere Energy.

ROB: Yeah, Cheniere is another one. It’s, you know, a lot — a lot of your viewers probably know it, but what a lot of people don’t know is the European natural gas prices remain elevated relative to U.S. natural gas prices, and also, more importantly, European inventories are low. Natural gas inventories are low, and they will be being refilled, you know, throughout the remainder of the year, and obviously into next year as well. So, because of the big — or the wider spread, in other words, higher natural gas prices in Europe and Asia, to a certain extent, relative to the U.S., that — that promotes companies like Cheniere and their ability to earn a little bit of extra profit from that spread. But more importantly, longer-term contracts is where Cheniere might be able to accelerate their business model because their business model is, you know, high-quality — quality cash flows, high long — long-term contracts, high-quality counterparties, significant free cash flow that they turn around and pay back to the shareholder, whether it’s dividends or stock buybacks.

ROGER: Yeah, and their volumes, just looking, their volumes are booked more than 95 per cent through 2030.

ROB: Yeah, yeah, that’s — that — that — that shows you the durability, the quality of the cash flow of Cheniere, and frankly, that’s — that — that quality and that duration of that — of that cash flow quality is just, in our opinion, not reflected in the current price. All right, and the dividend growth, is there room for that? Yeah, yeah. The management team has done a phenomenal job with capital allocation, including buybacks and dividend growth. They’ve stated 10 to 15 per cent dividend growth, which they have done and will have — or will continue to do. And, you know, we’ve modelled all that out. That looks more than feasible. So, yeah, that’s that. We really like the free cash flow generation of this company as well. All—

ROGER: Right, we got to wrap it up there, Rob. But thanks very much for joining us, as always.

ROB: Thank you for having me.

ROGER: Rob Thummel, senior portfolio manager at Tortoise Capital.

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This BNN Bloomberg summary and transcript of the Oct. 16, 2026 interview with Rob Thummel are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.