In this piece, we will take a look at the ten best energy stocks to buy now. If you want to skip our industry introduction and jump ahead to the top five stocks in this list, then head on to the 5 Best Energy Stocks to Buy Now.
The ongoing Russian invasion of Ukraine led to a global increase in crude oil prices as investors factored in the threat of sanctions on Russian oil exports. This price rise threatened recovering economies and stressed the importance of the energy and crude oil industry at a time when the bulk of investor focus and attention is on renewable and green energy sources.
The largest impact of this invasion was on the energy industry, as market indexes that track the performance of energy firms went up at a time when major stock indexes globally performed poorly due to fears of yet another economic slowdown. For instance, the Energy Select Sector SPDR Fund, which includes some of the largest energy companies in the world, is now up a staggering 54% year to date. Compare this to the year to date 15% drop in the Standard and Poor 500 market index, a 24% year to date drop in the NASDAQ 100, and a 12% year to date drop in the New York Stock Exchange, and you will see how energy stocks have remained the bulwark of portfolios that were wise enough to have given them a try.
Moving toward market research reports, we see that subsegments of the energy market are receiving favorable attention from analysts. A report by Market Research Store suggests that the fuel oil market was worth $168 billion by 2020. From then till 2026, this segment will grow at a compounded annual growth rate (CAGR) of 2.8% to touch a value of $221 billion. These industries are the largest consumers of fuel oil and consist primarily of the transportation sector.
Another report, this time from Allied Markets Research, focuses on the upstream segment of the energy supply chain. It analyses the oil refining market and estimates that this segment was worth $1.3 trillion in 2020 and it will grow at 5.3% CAGR to touch a whopping $3.7 trillion in 2030. This demand will be driven by areas such as the aviation industry in developing countries, with some, such as India, expected to double their refining capacity over the next ten years in order to meet this burgeoning demand.
Against this backdrop, we decided to compile some of the top energy stocks in the market. In our list today, some of the firms that are likely to catch your eye include Exxon Mobil Corporation (NYSE:XOM), ConocoPhillips (NYSE:COP), and Marathon Petroleum Corporation (NYSE:MPC).
Our Methodology
To make our list of the top ten energy stocks, we took a look at the industry and the numerous firms that are operating in it. The companies were then narrowed down based on a variety of factors, such as their recent financial performance, future initiatives, and some financial analysis and metrics. The selected companies were then listed based on Insider Monkey’s 895 hedge fund survey for Q2 2022. Let’s start our list of some of the best energy stocks to buy now.
Best Energy Stocks to Buy Now
10. Equinor ASA (NYSE:EQNR)
Number of Hedge Fund Holders: 9
Equinor ASA (NYSE:EQNR), which ranks 10th in our list of the best energy stocks to buy now, is a diversified Norwegian energy product explorer and seller. The company focuses its attention on mining and selling petroleum, petroleum derivatives, and other forms of energy. It has millions of barrels of proven crude oil reserves, and the firm also targets the renewable energy segment through wind and carbon capture and storage projects.
Equinor ASA (NYSE:EQNR) revenues for the second fiscal quarter grew by a whopping 109% as the company bathed in record high oil prices. Year to date, its share price has appreciated by 55%, at a time when major indexes took a nosedive as we outlined earlier. Its price to earnings multiple of 8.28 is significantly lower than the sector average of 34.66, indicating that the stock is undervalued and presents a potential upside. Finally, Equinor ASA (NYSE:EQNR) also pays a 33 cent dividend for a 3.15% yield.
Morgan Stanley raised Equinor ASA (NYSE:EQNR)’s share price target to NOK 304 from NOK 287 in August 2022 alongside keeping an Underweight rating on the shares. Insider Monkey’s Q2 2022 survey of 895 hedge funds indicated that nine had bought the company’s shares.
Equinor ASA (NYSE:EQNR)’s largest investor is Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital which owns 10 million shares that are worth $356 million.
Equinor ASA (NYSE:EQNR) joins ConocoPhillips (NYSE:COP), Exxon Mobil Corporation (NYSE:XOM), and Marathon Petroleum Corporation (NYSE:MPC in our list of top energy stocks.
9. TotalEnergies SE (NYSE:TTE)
Number of Hedge Fund Holders: 20
TotalEnergies SE (NYSE:TTE) is one of the largest oil and gas companies in the world, and also among the oldest. The firm is headquartered in Courbevoie, France, and it was set up in 1925. It engages in exploring and producing a wide variety of fuels such as liquefied natural gas (LNG) and crude oil, producing electricity from renewable energy sources such as hydroelectric and solar, and shipping its products.
TotalEnergies SE (NYSE:TTE) has one of the strongest renewable energy targets out of the major oil companies, as it plans to have 35 Giga Watts of capacity by 2025. Through consensus earnings per share (EPS) estimates for $11.18, $10.11, and $8.30 for 2022, 2023, and 2024, a required return of 9%, and 0% terminal growth rate, TotalEnergies SE (NYSE:TTE) implied share price comes out at $71.52 for a significant upside potential over its current share price of $53.75. The firm also pays a $2.96 dividend per share for a 5.51% annual yield. These factors make TTE one of the best energy stocks to buy now.
Piper Sandler increased TotalEnergies SE (NYSE:TTE)’s share price target to $69 from $64 in July 2022, sharing that oil stocks have a good time coming after fears of recession have already been priced in the share prices. Insider Monkey’s Q2 2022 survey of 895 hedge funds revealed that 20 had invested in the company.
TotalEnergies SE (NYSE:TTE)’s largest investor is Ken Fisher’s Fisher Asset Management which owns 26 million shares that are worth $1.4 billion.
8. Enbridge Inc. (NYSE:ENB)
Number of Hedge Fund Holders: 25
Enbridge Inc. (NYSE:ENB) is an energy infrastructure company that is headquartered in Calgary, Canada. The firm targets a wide variety of energy sectors such as liquids, gas, renewable energy power generation, and other energy services. Its liquids and gas segments cater to the needs of both residential and commercial customers, while the renewable energy segment uses wind, solar, waste, and other resources to generate power.
Enbridge Inc. (NYSE:ENB)’s mainline oil pipeline system is responsible for transporting 70% of Canadian oil exports as well, providing it with well grounded footing in the industry. To add to this, the firm’s natural gas pipeline system in the U.S. is responsible for delivering close to 20% of all of the country’s natural gas supplies. Enbridge Inc. (NYSE:ENB) also pays a 67 cent dividend for a 6.18% yield.
Raymond James increased Enbridge Inc. (NYSE:ENB)’s share price target to CAD 57 from CAD 55 in August 2022. Insider Monkey scanned 895 hedge fund portfolios for this year’s second quarter to discover that 25 had held a stake in the firm.
Out of these, Rajiv Jain’s GQG Partners is Enbridge Inc. (NYSE:ENB)’s largest investor. It has a $2.1 million stake that comes through 51 million shares.
7. BP p.l.c. (NYSE:BP)
Number of Hedge Fund Holders: 27
BP p.l.c. (NYSE:BP) was founded in 1908 and is headquartered in London, United Kingdom. The company refines and produces oil and gas, and it is known for its strong emphasis on renewable energy production. Some of the renewable energy sources that the firm focuses on are biofuels, wind, and solar power, alongside hydrogen capture and storage.
A discounted cash flow model using consensus analyst EPS estimates, a 9% rate of return, and a 0% terminal growth rate leads to an implied share price of $52.72 – for a significant implied upside over the current share price of $32/share. Finally, BP p.l.c. (NYSE:BP) also pays a 36 cent dividend for a 4.46% yield.
Morgan Stanley raised BP p.l.c. (NYSE:BP)’s share price target to 566 GBp from 540 GBp in August 2022. Insider Monkey’s survey of 895 funds for this year’s June quarter revealed that 27 had invested in the company’s shares.
BP p.l.c. (NYSE:BP)’s largest investor is Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital which owns 26 million shares that are worth $750 million.
6. APA Corporation (NASDAQ:APA)
Number of Hedge Fund Holders: 36
APA Corporation (NASDAQ:APA) is an American company that develops oil and gas properties. It has operations in the U.S., U.K., Egypt, and South America. The firm is based in Houston, Texas.
APA Corporation (NASDAQ:APA) has a plan to aggressively increase its share buybacks over the coming quarters that could see its share buyback program increase to $400 million per quarter from $261 million per quarter if upward trends in commodity prices continue. Based on its $2.9 billion of guided free cash flows for this year, the firm is valued at 5x of price to cash flow, which is impressive as it brings it in line with the metrics for larger oil companies. APA Corporation (NASDAQ:APA) pays a 12 cent dividend for a 1.24% yield.
MKM Partners increased APA Corporation (NASDAQ:APA)’s share price target to $50 from $45 in August 2022, sharing that natural gas prices and LNG demand are positively tuned for the company. Insider Monkey analyzed 895 hedge fund portfolios for this year’s Q2 to find out that 36 had invested in the company.
Natixis Global Asset Management’s Harris Associates is APA Corporation (NASDAQ:APA)’s largest investor that owns 16 million shares that are worth $581 million.
Oakmark Funds mentioned the company in its Q1 2022 investor letter. Here is what the fund said:
“Our oil holding, APA Corporation (NASDAQ:APA) (+54%) was one of 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.”
Exxon Mobil Corporation (NYSE:XOM), ConocoPhillips (NYSE:COP), and Marathon Petroleum Corporation (NYSE:MPC) are met by APA Corporation (NASDAQ:APA) in our list of hot energy stocks for you to take a look at.
Click here to continue reading and see 5 Best Energy Stocks to Buy Now.
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Disclosure: None. 10 Best Energy Stocks to Buy Now is originally published on Insider Monkey.
