In this article, we will discuss: 10 Best American Energy Stocks To Buy According to Hedge Funds.
The energy industry includes stocks that are involved in the production or supply of energy. Companies engaged in oil and gas drilling, refining, and discovering and developing oil or gas reserves are all part of the energy sector or industry. The energy industry also comprises integrated power utility companies that use renewable energy and coal.
Energy companies continue to suffer challenges as oil supply exceeds demand. Oil prices have been below $70/barrel since early September. According to U.S. Bank Asset Management’s senior investment strategy director, Rob Haworth:
“The oil market is one that remains well supplied but isn’t well demanded.” Although the U.S. economy is strong, other major oil users like China and Germany are experiencing economic challenges. As a result, global demand is lagging.”
Nonetheless, a number of energy companies have made encouraging achievements in 2024, and investors have reaped financial rewards as the energy sector of the broader market has grown by 12.74% since the start of the year. Based on exceptional results in 2021 and 2022, it has increased by 19.89% in just three years and by 10.61% growth over the previous five years.
However, according to RSM’s Energy Outlook 2024 report, the North American energy sector will confront significant potential problems due to a global move toward renewable energy sources, aging infrastructure, and rising electricity consumption. Infrastructure limitations continue to be a major obstacle. Scalability concerns have been brought to light by record U.S. oil and natural gas output as well as a boom in renewable energy, affecting projects like solar farms in California and drilling in Texas. These challenges show how urgently infrastructure modernization investments are needed.
As per the aforementioned report, North America’s demand for electricity has increased to levels not seen in many years. Emerging technologies like green hydrogen, the use of electric vehicles, and growing data centers are important drivers. The use of machine learning and other analytical AI technology is growing among energy companies. This change alters the energy sector and aligns with tax incentives and the company’s environmental, social, and governance goals. Most importantly, integrating clean energy is essential as companies adjust to meet rising demand sustainably.
According to BloombergNEF, $303 billion was spent on U.S. renewable energy in 2023, a 22% increase from the year before, showing the continued pace of the energy transformation. Globally, $1.77 trillion was invested, signifying a strong push toward decarbonization. Even though renewable energy requires more cash, companies of all sizes—from startups to established oil and gas companies—are shifting their focus to renewables as the case for clean energy grows. This change sets up the energy industry for a significant and sustainable future.
With that said, here are the 10 Best American Energy Stocks To Buy According to Hedge Funds.
Wind turbines against a backdrop of the sky, signifying the power of renewable energy.
Methodology:
We sifted through holdings of Energy ETFs and online rankings to form an initial list of 20 American Energy stocks. Then we selected the 10 stocks that were the most popular among institutional investors. The stocks are ranked in ascending order based on the number of hedge funds that have stakes in them, as per Insider Monkey’s database of Q3 2024. We have used the stock’s market cap as of November 21, 2024, as a tie-breaker in case two or more stocks have the same number of hedge funds invested.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here)
10. Baker Hughes Company (NASDAQ:BKR)
Number of Hedge Fund Holders: 45
The Baker Hughes Company (NASDAQ:BKR) offers a range of services and solutions to the global industrial and energy value chain. The business is divided into two segments: Industrial & Energy Technology (IET) and Oilfield Services & Equipment (OFSE). BKR has surged by over 28% since the start of 2024, coming through as one of the best American stocks to buy now.
Alongside SLB and Halliburton, two of the biggest names in the oilfield services industry, Baker Hughes Company (NASDAQ:BKR) is one of the Big Three. It has held the top spot in specialized chemicals since at least 2008 and continues to hold a significant market position in several end sectors, including directional drilling and specialty chemicals. Although foreign (non-US) markets provide the majority of Baker Hughes’ revenue and are typically less volatile, the cyclical nature of the gas and oil industries presents constant challenges.
The business had a great financial performance in the third quarter of 2024. Revenue climbed by 4.02% YoY to $6.9 billion, due to a strong performance in Industrial & Energy Technology (IET), which included record orders and growing demand for innovative compressor and decarbonization technologies such as the creation of CarbonEdge. Baker Hughes Company (NASDAQ:BKR) also announced robust cash flow growth in the third quarter of 2024, with free cash flow up 27% to $754 million and operating cash flow up 25% year over year to over $1 billion.
Susquehanna, an analyst, maintained a positive rating on Baker Hughes Company (NASDAQ:BKR) shares and increased the price target from $46 to $48 on October 4, 2024. Following better-than-expected profits in both the OFSE and IET divisions, the company revised its model.
Cliff Asness’s AQR Capital Management was the largest stakeholder in the company from among the funds in Insider Monkey’s database. It owns over 4.3 million shares worth $156.6 million as of Q3.
9. EOG Resources Inc. (NYSE:EOG)
Number of Hedge Fund Investors: 46
One of the best American stocks to buy, EOG Resources, Inc. (NYSE:EOG) is an oil and gas company holding properties in numerous US shale plays, including the Permian Basin and the Eagle Ford. EOG’s approach to capital allocation is slightly different from that of other US exploration and production companies. The company primarily concentrates on organic exploration activities, although the consolidation bug has also hit its peers and integrated majors. Furthermore, it has adopted a capital allocation strategy that concentrates on paying shareholders back while still being open to investing in modest production growth, similar to that of its US E&P peers. Ultimately, the company changed course earlier than most to become a low-cost provider in a market that overextended itself during the shale revolution. EOG is positioned as a top shale company with industry-leading returns on capital due to its impressive asset mix, which includes its dominant position in the Delaware Basin.
Total hydrocarbon output increased by about 3% sequentially or 8% annually to almost 1,076 thousand barrels of oil equivalent per day in Q3 2024. Additionally, in this quarter, the operating cash flow reached $3.6 billion, up 32.69% year over year, maintaining a healthy cash flow over the years. The company has a stable and regularly growing dividend. EOG Resources, Inc. (NYSE:EOG) announced a $5 billion increase in share repurchase authorization along with a 7% dividend increase, showing confidence in the company and its capacity to maintain growth across commodity price cycles.
John Freeman, an analyst with Raymond James, maintained his Strong Buy rating on EOG Resources, Inc. (NYSE:EOG) shares on November 21, 2024, and raised the price objective from $156 to $167. In a research note, the analyst informs investors that EOG’s Q3 results were good, with a slight beat on production volumes and topline beats on earnings measures. As a result of EOG’s continued strong performance in Utica, the company has decided to give the region a higher value in its terminal cash flow.
Natixis Global Asset Management’s Harris Associates was the largest stakeholder in the company from among the funds in Insider Monkey’s database as of Q3 2024.. It owns over 7 million shares worth $861.5 million.
Artisan Value Fund stated the following regarding EOG Resources, Inc. (NYSE:EOG) in its fourth quarter 2023 investor letter:
“On the downside in Q4, our two energy holdings, Schlumberger, the world’s largest oil services company, and EOG Resources, Inc. (NYSE:EOG), a US shale-focused E&P company, were weak along with the broader sector. EOG is one of the highest quality operators in the E&P space. EOG has a low-cost production position with a strong reserve base, giving it an advantage versus peers. Further, EOG’s management has long focused on return on invested capital and cash flow generation, distinguishing it from many of the company’s competitors, which prioritize growth over profitability. Its commitment to return excess capital to shareholders via regular and special dividends is also highly appealing, particularly in a period of rising interest rates. The company has proven its ability to create economic value for shareholders, even over the past decade that included the toughest energy commodity environment of the last 30+ years. The company’s strong balance sheet enabled it to increase production capabilities during the prior downturn.”
8. Valero Energy Corporation (NYSE:VLO)
Number of Hedge Fund Investors: 49
Market Cap as of November 21: 44.67 billion
In the US, Valero Energy Corporation (NYSE:VLO) is among the biggest independent refiners. It runs 15 refineries in the US, Canada, and the UK with a combined daily throughput capacity of 3.2 million barrels, making it one of the best American energy stocks. The company also has 12 ethanol plants with a combined capacity of 1.6 billion gallons per year and a 50% investment in Diamond Green Diesel, which can create 1.2 billion gallons of renewable diesel per year.
Valero Energy Corporation (NYSE:VLO) remains well-positioned for almost any market condition due to its high-quality refining assets and location, which allows for greater feedstock flexibility. Valero has always had an advantage because of its more efficient system of 15 refineries, which enables it to turn lower-quality feedstock into a high-value output. When domestic light crude discounts were available, it changed course and began processing larger quantities of high-quality discounted domestic crude by building more light crude processing capacity, investing in transportation infrastructure, and replacing imported crude with domestic.
Valero Energy Corporation (NYSE:VLO) produced $1.3 billion in operating cash flow and returned $907 million to shareholders in the third quarter, displaying a strong operational focus and a disciplined capital strategy. The Diamond Green Diesel SAF project’s successful completion raises the possibility for future growth in renewable fuels.
Jason Gabelman has given the Valero Energy Corporation (NYSE:VLO) a Buy rating because of its ability to use its balance sheet during economic downturns to fund share buybacks, showing a strategic commitment to shareholder returns. Furthermore, even in difficult times, Valero’s dedication to upholding a minimum payout ratio of 40-50% guarantees a steady return to investors.
Valero Energy Corporation (NYSE:VLO)’s mid-cycle free cash flow valuation, which uses 2026 as the terminal year, is still appealing. The optimistic outlook is further strengthened by the company’s ability to increase buybacks if stock prices decline.
Steve Cohen’s Point72 Asset Management was the largest stakeholder in the company from among the funds in Insider Monkey’s database. It owns more than 1 million shares worth $137.02 million as of Q3.
7. Diamondback Energy Inc. (NASDAQ:FANG)
Number of Hedge Fund Investors: 49
Market Cap as of November 21: 53.35 billion
When Diamondback Energy, Inc. (NASDAQ:FANG) went public in 2012, it was a small oil and gas company. However, through a combination of corporate acquisitions, including the 2024 acquisition of Endeavor Energy, and organic development, it quickly grew to become one of the largest Permian-focused oil companies. The company only operates in the Permian Basin. It maintains a sustainable margin advantage by continuously ranking among the lowest-cost US-based independent producers in the entire industry.
Diamondback Energy, Inc. (NASDAQ:FANG)’s revenue climbed by 13% in Q3 2024, due to increasing production volumes, which were boosted by the conclusion of the Endeavor merger, as well as increased sales of purchased oil. In Q3, sales of natural gas, oil, and natural gas liquid grew by 3% year over year. With an annualized yield of 2.0%, the announced Q3 2024 base dividend of $0.90 per share offers stockholders consistent returns.
On November 19, 2024, Raymond James maintained a Strong Buy rating on Diamondback Energy, Inc. (NASDAQ:FANG) shares and increased the price target from $232 to $237. The analyst informs investors in a research note that Diamondback executed an acreage trade to further core up their Midland Basin position while offloading some legacy PDP heavy acreage in Delaware, but there were no surprises on the top-line items because Diamondback pre-released production, capex, and pricing. Raymond James reduced its 2025 capital expenditure forecast to $4 billion from $4.25 billion and increased its 2025 production expectations by 10 mboe/d, mostly due to greater NGL and gas volumes than it had initially projected.
Ric Dillon’s Diamond Hill Capital was the largest stakeholder in the company from among the funds in Insider Monkey’s database. It owns 2,158,910 shares worth $372.20 million as of Q3.
6. Quanta Services Inc. (NYSE:PWR)
Number of Hedge Fund Holders: 58
Leading specialist contracting firm Quanta Services, Inc. (NYSE:PWR) offers complete infrastructure solutions for the pipeline, energy, communications, and gas and electric utility markets in the US, Canada, and Australia. Quanta divides its results into three reportable segments: electric power, renewables infrastructure, and underground utility and infrastructure.
Quanta Services, Inc. (NYSE:PWR) is a top specialist contractor serving clients in the telecom, oil and gas, utility, and renewable energy markets. Its strategy goal is to position itself to benefit from secular growth trends, such as renewable energy deployment and electric grid investment, that raise demand for contractual services. In the past, the business has employed acquisitions to support organic growth in order to fulfill its objectives.
In Q3 of 2024, Quanta Services, Inc. (NYSE:PWR)’s revenue grew by 16% YoY to $6.5 billion. The rise in revenue was primarily driven by strategic acquisitions, the successful integration of acquired firms, and the high demand for the company’s services. The cash flow from operations increased by 82% to $739.91 million, while the cash flow increased by 93% YoY. Moreover, the acquisition of Cupertino Electric, which added electrical infrastructure solutions in the technology and renewable energy sectors, was one of the most significant moves for Quanta Services in Q3 2024.
The price target for Quanta Services, Inc. (NYSE:PWR) was increased by DA Davidson from $260 to $295 on November 4, 2024. In a research note, the analyst informs investors that the firm’s 2025 projections have improved since it believes the company should keep taking advantage of the current tailwinds in power generation development, electrical delivery, and complex facility buildout, even though it also sees these opportunities being fairly represented in estimates.
William Harnisch’s Peconic Partners LLC was the largest stakeholder in the company among the funds in Insider Monkey’s database. It owns 5,498,565 shares worth $1.64 billion as of Q3.
5. Chevron Corporation (NYSE:CVX)
Number of Hedge Fund Investors: 63
Chevron Corporation (NYSE:CVX) is a global energy business that engages in exploration, production, and refining. It produces 3.1 million barrels of oil equivalent per day, which includes 1.8 million barrels of liquids and 7.7 million cubic feet of natural gas per day, making it the second-largest oil company in the United States. Production occurs throughout Europe, Africa, Asia, Australia, South America, and North America. It can refine 1.8 million barrels of oil per day at its refineries in the US and Asia. At the end of 2023, proven reserves were 11.1 billion barrels of oil equivalent, which included 30.4 trillion cubic feet of natural gas and 6.0 billion barrels of liquids. CVX has surged by over 8% since the start of 2024, coming through as one of the best American stocks to buy.
Despite a decline from the previous year, Chevron Corporation (NYSE:CVX)’s third-quarter adjusted earnings were above market forecasts. The Permian Basin’s record output propelled the company’s 7% YoY growth in net oil-equivalent production. The company also started production on significant Gulf of Mexico projects in the United States. It announced a $6.5 billion Canadian asset sale and repurchased $4.7 billion worth of shares during the quarter. By the end of 2026, the company intends to cut structural expenses by $2-3 billion.
On November 4, 2024, RBC Capital raised Chevron Corporation’s (NYSE:CVX) price target to $175 from $170, maintaining an Outperform rating on the stock. Although there is still uncertainty surrounding the Hess (HES) deal, the company’s remarks regarding peak Permian capex in 2024 should bode well for free cash flow into 2025 and beyond, the analyst tells investors in a research note. Its Q3 results included a strong operational performance that culminated in an earnings and cash flow beat relative to market expectations.
Warren Buffett’s Berkshire Hathaway was the largest stakeholder in the company from among the funds in Insider Monkey’s database. It owns 118,610,534 shares worth $17.47 billion as of Q3.
4. Schlumberger Limited (NYSE:SLB)
Number of Hedge Fund Holders: 65
Schlumberger Limited (NYSE:SLB) is the top oilfield services provider in the world based on market share, making it one of the best American stocks to buy from the energy sector. Even though the market is largely fragmented, SLB is in the first or second place of competitors in many of the distinct oligopolies in which it works. The business was established in 1926 by two brothers with the same last name and is also known as Schlumberger. It is primarily recognized today as a global leader in innovation, and it concentrates its strategy on its three growth engines: new energy, digital, and core businesses. International markets account for more than three-quarters of the company’s sales, and its digital revenue alone exceeds $1 billion.
In Q3 of 2024, Schlumberger Limited (NYSE:SLB)’s revenue grew by 10% to $9.16 billion YoY. Growth was driven by Production Systems, which saw a 31% YoY increase in revenue to $3.1 billion. Revenue from digital and integration increased 11% YoY due to the growing use of AI-powered tools and digital solutions. Europe & Africa and the Middle East & Asia both saw 16% YoY revenue increases, leading regional growth. North America’s YoY growth stayed at 3%.
Schlumberger Limited (NYSE:SLB) expanded its digital offering by launching the Lumi AI platform and forming partnerships with NVIDIA, AWS, and Aramco.
Despite cautious upstream investing in the face of declining oil prices, Schlumberger Limited (NYSE:SLB) is nonetheless enthusiastic about long-term foreign projects. The business reiterated its goal of having an adjusted EBITDA margin of at least 25% for the entire year.
Jean-Marie Eveillard’s First Eagle Investment Management was the largest stakeholder in the company from among the funds in Insider Monkey’s database. It owns 27.5 million shares worth $1.15 billion as of Q3.
3. ConocoPhillips (NYSE:COP)
Number of Hedge Fund Holders: 66
ConocoPhillips (NYSE:COP) is an independent exploration and production company headquartered in the United States. ConocoPhillips has set up a 10-year plan for constrained investment, steady development, improved returns, and, most crucially, cash distributions to shareholders, distinguishing itself from larger and smaller competitors. Conoco’s strategy, which includes a defined policy on cash return to shareholders and a commitment to capital restraint, makes it an attractive choice in the energy sector. Its excellent financial position protects the dividend in a downcycle, and its low-cost portfolio offers it high-return investment choices to grow in a rising price environment.
In Q3 of 2024, the operating activities generated $5.8 billion in cash, with cash from operations amounting to $4.7 billion. The ordinary dividend was raised by 34% to $0.78 per share, while the authorization to repurchase existing shares was expanded to $20 billion.
On November 22, 2024, ConocoPhillips (NYSE:COP) finalized the acquisition of Marathon Oil Corporation (NYSE: MRO), which improved long-term growth prospects. Over the course of the next 12 months, the company anticipates generating synergies of more than $1 billion on a run-rate basis.
Susquehanna analyst Biju Perincheril maintained a positive recommendation on ConocoPhillips (NYSE:COP) and increased the price target to $148 from $144 on November 1, 2024. Strong L-48 performance drove the company’s Q3 results, which included a beat in both output and EPS. The firm raised its synergy target for the MRO purchase to $1 billion from $500 million before, driven by a $500 million reduction in capex for the combined company as it requires fewer rigs and frac crews to meet its low-single-digit growth aim.
Boykin Curry’s Eagle Capital Management was the largest stakeholder in the company from among the funds in Insider Monkey’s database. It owns 15,214,281 shares worth $1.60 billion as of Q3.
2. NextEra Energy Inc. (NYSE:NEE)
Number of Hedge Fund Holders: 69
NextEra Energy, Inc. (NYSE:NEE)’s regulated utility, Florida Power & Light (FP&L), is Florida’s largest rate-regulated utility. The company owns 34 gigawatts of generation and supplies electricity to around 6 million consumer accounts in Florida. About 70% of NextEra’s consolidated operational earnings come from FP&L. The renewable energy division, NextEra Energy Resources, produces and markets electricity across the US and Canada using more than 34 GW of generating capacity from solar, wind, nuclear, and natural gas.
NextEra Energy, Inc. (NYSE:NEE)’s high-quality regulated utility in Florida, combined with its rapidly growing renewable energy business, provides investors with the best of both worlds: a reliable dividend and industry-leading renewable energy growth potential.
NextEra Energy, Inc. (NYSE:NEE)’s third-quarter 2024 results were impressive. Revenue increased by 6% year on year, principally owing to greater adjusted profits per share, significant investments in renewable energy projects, and solid operational performance at both FPL and NextEra Energy Resources. FPL increases the amount of regulatory capital employed by about 9.5% annually. Moreover, NextEra Energy Resources signed incremental framework agreements with two Fortune 50 firms and added roughly 3 gigawatts of new renewables and storage projects to its backlog.
Following the Q3 results, Barclays maintained its Equal Weight rating on NextEra Energy, Inc. (NYSE:NEE) shares and increased its price target from $80 to $82 on October 25, 2024. The company claims that, while maintaining the power demand theory, it surpassed projections for backlog additions.
Rajiv Jain’s GQG Partners was the largest stakeholder in the company from among the funds in Insider Monkey’s database. It owns nearly 13 million shares worth $1.08 billion as of Q3.
Madison Sustainable Equity Fund stated the following regarding NextEra Energy, Inc. (NYSE:NEE) in its Q3 2024 investor letter:
“The top contributors in the quarter were NextEra Energy, Inc. (NYSE:NEE), Oracle Corporation, Progressive Corporation, Equifax Inc., and United Healthcare. NextEra has continued to perform well given its strong position in the renewable energy space, increasing demand for power, its transmission capabilities, as well as a tailwind from lower interest rates.”
1. Exxon Mobil Corporation (NYSE:XOM)
Number of Hedge Fund Holders: 86
Exxon Mobil Corporation (NYSE:XOM) tops our list of the best American stocks to buy from the Energy sector. It is an integrated oil and gas company that conducts global oil exploration, production, and refinement. It generated 7.7 billion cubic feet of natural gas per day and 2.4 million barrels of liquids in 2023. Reserves were 16.9 billion barrels of oil equivalent at the end of 2023, with liquids accounting for 66% of total reserves. The company is one of the world’s largest refiners, with a total global refining capacity of 4.5 million barrels of oil per day, as well as a major producer of commodities and specialty chemicals.
Exxon Mobil Corporation (NYSE:XOM) is still dedicated to oil and gas, even though many of its competitors are shifting investments to renewables in order to meet long-term carbon intensity reduction targets. It has declared emission reduction objectives and reacted to requests to include more external voices on its board. Along with investing in low-carbon technologies, it maintains oil and gas production as the primary focus of these measured efforts. Although investors who care about the environment are unlikely to applaud this approach, it has a higher chance of success and is likely to be less risky.
Industry-leading Q3 earnings of $8.6 billion and substantial year-to-date free cash flow of $26.4 billion with operating cash flow growth of 10.06% YoY demonstrate financial resilience in the face of weaker refining margins. Record liquids output of 3.2 million barrels per day was attained, bolstered by sales of high-value products and $11.3 billion in structural cost savings since 2019. Exxon Mobil Corporation (NYSE:XOM) is positioned as a leader in the energy transition due to its leadership in hydrogen and carbon capture programs, with a $30 billion market opportunity by 2030.
Ken Fisher’s Fisher Asset Management was the largest shareholder in the company from among the funds in Insider Monkey’s database. It owns 29,197,557 shares worth $3.43 billion as of Q3.
Overall, Exxon Mobil Corporation (NYSE:XOM) ranks first on our list of the best American stocks to buy. While we acknowledge the potential for XOM to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than XOM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. 10 Best American Energy Stocks To Buy According to Hedge Funds is originally published on Insider Monkey. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
