In this article, we discuss the 10 best oil stocks to buy according to hedge funds. If you want to read about some more oil stocks, go directly to 5 Best Oil Stocks To Buy According To Hedge Funds.
The oil sector has rebounded from the lows of the pandemic this year and prices have touched record highs last seen decades ago. However, geopolitical tensions and supply/demand imbalances continue to keep prices volatile. Even as European nations move towards shutting off oil imports from Russia in the wake of the Ukraine invasion, prominent investment advisors, like JPMorgan, have predicted the cost of the barrel to remain around $114 as demand decreases despite the prospects of a Chinese buying spree.
Another major factor contributing to the uncertainty around the oil sector is the renewed push towards a greener future, with US President Biden recently approving a massive plan for billions in subsidies for renewable giants like Tesla, Inc. (NASDAQ:TSLA), General Electric Company (NYSE:GE), and First Solar, Inc. (NASDAQ:FSLR), that will push businesses away from fossil fuels in the coming years. Demand pressures are expected to ease through as the US increases drilling, OPEC takes production decisions, and sanctions are placed on Russia.
The US Energy Information Administration has forecast that the Brent crude oil spot price could average around $98 per barrel in the fourth quarter of 2022 and $97/b in 2023. Per the agency, the possibility of petroleum supply disruptions and slower-than-expected crude oil production growth are some of the reasons that could create the potential for higher oil prices in the coming months. It has also said that the possibility of slower-than-forecast economic growth creates the potential for lower prices.
Our Methodology
Stocks that operate in the oil sector and were popular among hedge funds were preferred for the list. The analyst ratings and business fundamentals of the firms are also discussed to provide readers with some additional context for their investment choices. The hedge fund sentiment around each stock was calculated using the data of around 900 hedge funds tracked by Insider Monkey in the second quarter of 2022.
Photo by Robin Sommer on Unsplash
Best Oil Stocks To Buy According To Hedge Funds
10. Marathon Petroleum Corporation (NYSE:MPC)
Number of Hedge Fund Holders: 50
Marathon Petroleum Corporation (NYSE:MPC) operates as an integrated downstream energy company primarily in the United States. The firm features on the list of best energy stocks to invest in. On September 21, the company announced that it had agreed to a joint venture with Finnish peer Neste for the Martinez renewable fuels project in California. The firm added that all necessary permits and regulatory approvals had been received in this regard. Neste will contribute a total of $1 billion to the venture.
On September 12, Piper Sandler analyst Ryan Todd maintained a Neutral rating on Marathon Petroleum Corporation (NYSE:MPC) stock and lowered the price target to $110 from $111, noting that near-record distillate margins continue to drive upside to refining estimates.
At the end of the second quarter of 2022, 50 hedge funds in the database of Insider Monkey held stakes worth $2.7 billion in Marathon Petroleum Corporation (NYSE:MPC), compared to 43 in the preceding quarter worth $2.5 billion.
Just like Tesla, Inc. (NASDAQ:TSLA), General Electric Company (NYSE:GE), and First Solar, Inc. (NASDAQ:FSLR), Marathon Petroleum Corporation (NYSE:MPC) is one of the best energy stocks to buy now according to hedge funds.
In its Q4 2021 investor letter, Clark Street Value, an asset management firm, highlighted a few stocks and Marathon Petroleum Corporation (NYSE:MPC) was one of them. Here is what the fund said:
“During the worst of covid, I bought some LEAPs on Marathon Petroleum Corporation (NYSE:MPC) as a proxy for Par Pacific (PARR) since long dated options weren’t available on the later. Those MPC calls expire next month and I’ll take profits, with PARR I’ve reduced my position throughout the year and might sell the rest early next year, I’ve owned it for 6-7 years and it has gone nowhere, they haven’t touched the NOLs, just a difficult business that I probably don’t understand as well as I should.”
9. Chesapeake Energy Corporation (NASDAQ:CHK)
Number of Hedge Fund Holders: 50
Chesapeake Energy Corporation (NASDAQ:CHK) is an independent exploration and production company that engages in the acquisition, exploration, and development of properties for the production of oil, natural gas, and natural gas liquids from underground reservoirs. The company is one of the most prominent energy stocks to invest in. The company has an impressive dividend profile. On August 2, the firm declared a quarterly dividend of $2.32 per share. The forward yield was a solid 10.28%.
On August 1, Benchmark analyst Subash Chandra initiated coverage of Chesapeake Energy Corporation (NASDAQ:CHK) stock with a Buy rating and a price target of $137, noting the firm had emerged from bankruptcy to pursue a long-term return-of-capital model.
Among the hedge funds being tracked by Insider Monkey, Washington-based firm Oaktree Capital Management is a leading shareholder in Chesapeake Energy Corporation (NASDAQ:CHK), with 10 million shares worth more than $851 million.
In its Q1 2022 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Marathon Petroleum Corporation (NYSE:MPC) was one of them. Here is what the fund said:
“In the early days of the invasion, we made two measured changes to the portfolio based on longer-term fallout we anticipate from Russia’s invasion of Ukraine. First, we initiated small positions in U.S. natural gas producers Chesapeake (NYSE:CHK). Given its superior environmental profile compared to other fossil fuels, we have long favored natural gas in our energy holdings. Combustion of natural gas releases 50% less CO2 than coal, 25% less CO2 than gasoline and dramatically less particulate and pollution, per the U.S. Energy Information Administration. With the advances in shale production this century, the U.S. has become a natural gas powerhouse with some of the lowest-cost and largest reserves in the world. But because natural gas is difficult to ship across the ocean (it must be liquefied, which requires expensive infrastructure on both ends of the voyage), America’s gas bounty has ironically proved a burden for U.S. producers (…read more)
8. EQT Corporation (NYSE:EQT)
Number of Hedge Fund Holders: 52
EQT Corporation (NYSE:EQT) operates as a natural gas production company in the United States. The firm is among the best energy stocks to invest in. On September 6, the company announced that it would be purchasing the upstream assets of Appalachia for a combined $5.2 billion in cash and stock. The company also announced that it would be doubling the share buyback program to $2 billion. The firm has benefited from the energy crisis in Europe in the wake of the Russian invasion of Ukraine.
On September 21, Citi analyst Paul Diamond maintained a Buy rating on EQT Corporation (NYSE:EQT) stock and raised the price target to $60 from $48, noting that there was improving clarity surrounding the operational landscape for the firm into 2023.
At the end of the second quarter of 2022, 52 hedge funds in the database of Insider Monkey held stakes worth $2.3 billion in EQT Corporation (NYSE:EQT), compared to 52 in the preceding quarter worth $2.1 billion.
In its Q2 2022 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Marathon Petroleum Corporation (NYSE:MPC) was one of them. Here is what the fund said:
“We initiated a position in EQT (NYSE:EQT), the largest natural gas producer in the U.S., which possesses high-quality acreage within the Marcellus Shale basin. EQT has benefited from tight supply and demand dynamics as cleaner-burning natural gas takes global share from coal and exports to Europe and Asia provide an avenue of demand growth. Longer-term contracts enhance EQT’s earnings visibility as Europe eliminates its dependence on Russian gas.”
7. Pioneer Natural Resources Company (NYSE:PXD)
Number of Hedge Fund Holders: 56
Pioneer Natural Resources Company (NYSE:PXD) operates as an independent oil and gas exploration and production company. The firm is among the best energy stocks to invest in. On August 2, the firm posted earnings for the second quarter of 2022, reporting earnings per share of $9.36, beating analyst expectations by $0.56. The revenue over the period was $6.9 billion, up over 102% compared to the revenue over the same period last year and beating estimates by $100 million.
On September 21, Citi analyst Scott Gruber maintained a Buy rating on Pioneer Natural Resource Company (NYSE:PXD) stock and lowered the price target to $257 from $260, noting that exploration and production names had bounced back as oil slides.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in Pioneer Natural Resources Company (NYSE:PXD), with 698,300 shares worth more than $156 million.
In its Q1 2022 investor letter, Carillon Tower Advisers, an asset management firm, highlighted a few stocks and Pioneer Natural Resources Company (NYSE:PXD) was one of them. Here is what the fund said:
“Pioneer Natural Resources (NYSE:PXD) performed well in a strong energy sector. Pioneer stood out recently with a pledge to return a large majority of free cash flow to shareowners through dividends and stock buybacks, and ended hedging to give shareowners more earnings and dividend potential should oil and gas prices continue to rise.”
6. Devon Energy Corporation (NYSE:DVN)
Number of Hedge Fund Holders: 57
Devon Energy Corporation (NYSE:DVN) is an independent energy company primarily engaged in the exploration, development, and production of oil, natural gas, and natural gas liquids. It is one of the top energy stocks to invest in. On September 6, the company announced that it would be entering into a liquefied natural gas export partnership with LNG export infrastructure development company, Delfin Midstream. The partnership includes an executed Heads of Agreement for long-term liquefaction capacity.
On September 21, Citi analyst Scott Gruber maintained a Buy rating on Devon Energy Corporation (NYSE:DVN) stock and raised the price target to $77 from $62, noting that even though oil has slid, the exploration and production companies have bounced modestly.
At the end of the second quarter of 2022, 57 hedge funds in the database of Insider Monkey held stakes worth $1.5 billion in Devon Energy Corporation (NYSE:DVN), compared to 66 in the previous quarter worth $1.9 billion.
Along with Tesla, Inc. (NASDAQ:TSLA), General Electric Company (NYSE:GE), and First Solar, Inc. (NASDAQ:FSLR), Devon Energy Corporation (NYSE:DVN) is one of the best energy stocks to buy now according to hedge funds.
In its Q2 2022 investor letter, GoodHeaven Capital Management, an asset management firm, highlighted a few stocks and Devon Energy Corporation (NYSE:DVN) was one of them. Here is what the fund said:
“Our biggest dollar gainer within this period was Devon Energy Corporation (NYSE:DVN), a position which emanated from a takeover in early 2021 of our long time holding WPX Energy. We are sitting on a material (unrealized) gain from our cost and are now receiving material dividends thanks to Devon’s thoughtful fixed/variable dividend policy. Energy is now a hot sector for investors but we have had a material exposure for a long time. We remember a bit too well $40 oil, NEGATIVELY PRICED front-month oil contract, and what it’s like to own a company with leverage and negative free cash flow during such periods. Our desire to have our biggest portfolio exposures be high return, growing, reasonably predictable and moderately levered companies lead us to reduce our Devon exposure in the past. When the recent facts and circumstances for the industry changed and appeared supportive of healthy oil prices, we decided to maintain a sizable holding and more recently added to the position. At Devon’s Q1 dividend rate, which is mostly variable in nature, the shares now yield approximately 10% and our yield on our average cost is materially higher. In addition, we maintain additional energy exposure through our long-term (and successful) holding in Hess Midstream and less directly through TerraVest and Berkshire Hathaway’s energy investments.”
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Disclosure. None. 10 Best Oil Stocks To Buy According To Hedge Funds is originally published on Insider Monkey.