In this article, we discuss the 10 best energy stocks to buy now. If you want to skip our industry overview, take a look at the 5 Best Energy Stocks to Buy Now.
The Covid-19 pandemic was difficult for the energy sector. Global travel restrictions brought on by the Covid-19 outbreak reduced demand for oil by more than 30 million barrels in 2020. Oil prices entered negative territory for the first time ever, driving budget reductions and substantial capital restraint among energy producers.
Only a few years later, oil and gas prices have reached their highest levels in almost a decade in the wake of the Russian-Ukraine conflict, compelling numerous countries to reassess their energy requirements. Following the start of the conflict, global oil prices soared to more than $120 per barrel. The wholesale price of gas in Europe also increased by 10% due to imminent supply limitations by Russian energy giant Gazprom. Given the increase in oil and gas prices, investors’ interest in energy companies has increased significantly.
While higher oil and gas prices are good for industry margins and profits, the sector nevertheless will need to transition to renewable energy in the future. Given climate change initiatives and global warming, oil and gas demand will eventually decrease and renewable energy demand will increase. For the companies that don’t transition successfully, they will depend on oil and gas prices for their profits and margins, which could decline if the commodity prices fall. For those companies that successfully transition, the large size of the renewable energy market offers substantial opportunities for investors.
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Our Methodology:
In order to identify the best energy stocks to buy now, we are going to use the collective wisdom of nearly 900 hedge funds tracked by Insider Monkey. We started with The Energy Select Sector SPDR Fund holdings and sorted these stocks by the number of hedge funds in our database with long positions in each stock. The Energy Select Sector SPDR Fund is the oldest exchange-traded fund designed to provide extensive exposure to the energy sector of the equity market. The fund has $12 billion in assets, making it one of the biggest ETFs.
So, according to hedge funds, here are the 10 best energy stocks to buy right now:
10 Best Energy Stocks to Buy Now
10. EOG Resources, Inc. (NYSE:EOG)
No. of Hedge Fund Holders: 43
EOG Resources, Inc. (NYSE:EOG), headquartered in Houston, Texas, is one of the major crude oil and natural gas exploration and production firms in the United States. It also ranks 10th on our list of 10 best energy stocks to buy now.
Analysts like the stock. On August 26, investment advisory MKM Partners upgraded EOG Resources, Inc. (NYSE:EOG) stock to a Buy rating as the cost of natural gas has risen. Given the higher energy prices, EOG Resources, Inc. (NYSE:EOG) is profitable and as of September 8, the company has a dividend yield of 2.49%.
EOG Resources, Inc. (NYSE:EOG) is also popular with hedge funds. According to Insider Monkey’s Q2 data, 43 hedge funds had stakes in EOG Resources, Inc. (NYSE:EOG). The total value of the holdings is approximately $993 million.
Here is what Oakmark Funds had to say about EOG Resources, Inc. (NYSE:EOG) in its “Oakmark Select Fund” first-quarter 2022 investor letter:
“EOG Resources (NYSE:EOG) (+36%), was among our top contributors in the quarter as oil prices rallied due to tight supplies, which were then exacerbated by the Russian invasion of Ukraine. Although their share prices have increased considerably, both companies still look quite undervalued even using longer term oil prices in the $65-70 dollar range. Meanwhile, if times are good over the next couple of years, we expect these companies to return significant percentages of their market caps to shareholders.”
Alongside Occidental Petroleum Corporation (NYSE:OXY), ConocoPhillips (NYSE:COP), and Exxon Mobil Corporation (NYSE:XOM), EOG Resources, Inc. (NYSE:EOG) is a widely held energy stock among the hedge funds we track at the end of Q2 2022.
9. Marathon Petroleum Corporation (NYSE:MPC)
No. of Hedge Fund Holders: 50
Marathon Petroleum Corporation (NYSE:MPC) engages in petroleum refining, marketing, and transportation.
With the higher oil and gas prices, the company’s revenues have surged. In Q2 2022, Marathon Petroleum Corporation (NYSE:MPC) reported quarterly revenue of $54.24 billion, an increase of 81.8% year over year. Shares of Marathon Petroleum Corporation (NYSE:MPC) have also increased over 56% year to date.
Some analysts see more upside. In August, Theresa Chen of Barclays kept an Overweight rating on Marathon Petroleum Corporation (NYSE:MPC) stock and raised her price target from $112 to $94.
On July 27, Marathon Petroleum Corporation (NYSE:MPC) declared a quarterly dividend of $0.58 per share, in line with previous. Marathon Petroleum Corporation (NYSE:MPC)’s dividend yield on September 8 came in at 3.77%.
At the end of the second quarter of 2022, 50 hedge funds in the database of Insider Monkey held stakes worth $27.3 billion in Marathon Petroleum Corporation (NYSE:MPC).
8. Diamondback Energy, Inc. (NASDAQ:FANG)
No. of Hedge Fund Holders: 54
Diamondback Energy, Inc. (NASDAQ:FANG), headquartered in Midland, Texas, is an independent oil and natural gas company. The company’s main goals are to acquire, develop, explore, and exploit unconventional onshore oil and natural gas deposits in the Permian Basin in West Texas.
Given the higher gas prices, Diamondback Energy, Inc. (NASDAQ:FANG) has shown strong profits. In the second fiscal quarter, Diamondback Energy, Inc. (NASDAQ:FANG) reported a normalized EPS of $7.07, beating estimates by $0.40. The company’s revenue in the second quarter came in at $2.77 billion, an increase of 64.9% year over year, and beat revenue estimates by $330 million.
As of the end of Q2 2022, 54 of the hedge funds tracked by Insider Monkey owned stakes in Diamondback Energy, Inc. (NASDAQ:FANG). Those stakes held a collective value of over $811.4 million.
7. Pioneer Natural Resources Company (NYSE:PXD)
No. of Hedge Fund Holders: 56
Pioneer Natural Resources Company (NYSE:PXD) is an independent oil and natural gas exploration and production company. The company is currently active in the United States, Argentina, Canada, Equatorial Guinea, Nigeria, South Africa, and Tunisia. It ranks 7th on our list of 10 best energy stocks to buy now.
Given its scale, Pioneer Natural Resources Company (NYSE:PXD) has higher margins than many of its competitors and the company also had strong Q2 results with normalized EPS of $9.36, beating analyst estimates by $0.56.
The stock is popular among hedge funds. At the end of second quarter of 2022, 56 hedge funds in the database of Insider Monkey held stakes in Pioneer Natural Resources Company (NYSE:PXD), up from 54 the preceding quarter.
As of September 6, Abrams Bison Investments owned 598,000 shares in Pioneer Natural Resources Company (NYSE:PX). The hedge fund’s total stake in the company stood at over $133 million, which accounted for 15.08% of its 13F portfolio.
6. Devon Energy Corporation (NYSE:DVN)
No. of Hedge Fund Holders: 57
Devon Energy Corporation (NYSE:DVN) is a leading oil and gas producer in the US with a distinguished multi-basin portfolio that’s in expansion mode. The company recently agreed to buy Validus Energy, an operator in the Eagle Ford Shale, to improve its position in the energy sector. With the transaction, Devon anticipates gaining 42,000 net acres close to its current leasehold in the Eagle Ford Formation.
Some analysts are also bullish on the firm’s future prospects, with investment advisories like Mizuho, Raymond James, Truist, and Barclays raising their price targets on the stock this month.
57 hedge funds in Insider Monkey’s database had Devon Energy Corporation (NYSE:DVN) in a bullish position at the end of the second quarter of 2022. These hedge funds held shares in the firm worth about $1.5 billion.
Like Devon Energy Corporation (NYSE:DVN), Occidental Petroleum Corporation (NYSE:OXY), ConocoPhillips (NYSE:COP), and Exxon Mobil Corporation (NYSE:XOM) are also energy stocks widely held among hedge funds in our database at the end of Q2 2022.
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Disclosure. None 10 Best Energy Stocks to Buy Now is originally published on Insider Monkey.
