In this article, we discuss the 10 best oil stocks to buy according to hedge funds. If you want to skip our detailed analysis of these stocks, go directly to the 5 Best Oil Stocks To Buy According To Hedge Funds.
The prices of crude oil have skyrocketed this year on the back of increasing demand in a reopened economy and supply chain constraints due to hurricanes in the US that have affected production and low investments in the sector due to fears of a resurgent COVID-19. According to a report by news agency Reuters, the prices of crude oil have increased by more than 50% since January, adding to inflationary pressures. There are also murmurings that soaring oil prices could derail a post-pandemic economic recovery, especially in the US and India.
A meeting of the biggest oil producing countries in the world earlier this week to discuss the new developments ended with agreement on a previous pact for a gradual increase in production, despite calls from the US and India to boost supplies immediately. In September, the Bank of America had predicted that crude oil prices would climb above $100 per barrel in the winter season. On October 5, crude oil soared above $81 per barrel, with a further rally expected as temperatures decrease and demand rises.
Investment bank Goldman Sachs has also revised their year-end crude oil forecast to $90 per barrel, up from $80 per barrel. However, Russian Deputy Prime Minister Alexander Novak, after the meeting of the oil producing firms, told the media that the body was monitoring the situation around crude oil and expected the demand to fall in the fourth quarter. In July, the body had agreed to increase the monthly output by 400,000 barrels per day until around April 2022 to phase out existing production cuts.
Market experts have expressed concern that oil futures could also be affected by the slowdown in the Chinese economy due to the collapse of property giant Evergrande, supply chain disruptions due to the spread of the delta variant of the coronavirus, and disagreements about production among oil producing countries. However, despite these concerns, crude oil has rallied this year, giving much-needed breathing space to the oil industry that was one of the hardest-hit sectors of the economy during the pandemic.
Tamas Varga, a senior analyst at PVM Oil Associates, penned a note to investors on the future of crude oil on October 5, affirming that the market was confident about the industry. Despite cautioning that some of the optimism was misplaced, he stressed that there was still room for a potential upside in the prices of crude oil over the coming months due to winters. Investors keen to take advantage of these growth catalysts for the industry should follow the smart money in for the best chance of scoring handsome returns.
Some of the top oil stocks to buy according to hedge funds presently include Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and ConocoPhillips (NYSE:COP), among others discussed in detail below. Oil companies have dealt with the twin pressures of the pandemic and environmentalists to emerge out of the crisis stronger than expected. However, the industry still faces a lot of challenges, including activism from climate-focused hedge funds that are forcing policy changes at the highest level.
The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 86 percentage points since March 2017. Between March 2017 and July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 86 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Our Methodology
With this context in mind, here is our list of the 10 best oil stocks to buy according to hedge funds. The aim of the article is to provide a basic rundown of the most popular oil stocks among hedge funds.
The list is compiled according to the number of hedge funds having stakes in each company. Data from the 873 funds tracked by Insider Monkey was used for this purpose.
Special importance was assigned to outlining the basic business fundamentals and analyst ratings for each firm to provide readers with some context so they can make more informed investment choices.
Best Oil Stocks To Buy According To Hedge Funds
10. EQT Corporation (NYSE:EQT)
Number of Hedge Fund Holders: 43
EQT Corporation (NYSE:EQT) is placed tenth on our list of 10 best oil stocks to buy according to hedge funds. The company operates as a natural gas and crude oil production firm. It is headquartered in Pennsylvania.
On August 30, investment advisory Citi reinstated coverage of EQT Corporation (NYSE:EQT) stock with a Buy rating and a price target of $23. Kevin Cunane, an analyst at the advisory, issued the ratings update.
At the end of the second quarter of 2021, 43 hedge funds in the database of Insider Monkey held stakes worth $468 million in EQT Corporation (NYSE:EQT), up from 35 the preceding quarter worth $437 million.
Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm DE Shaw is a leading shareholder in EQT Corporation (NYSE:EQT) with 2.7 million shares worth more than $62 million.
Just like Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and ConocoPhillips (NYSE:COP), EQT Corporation (NYSE:EQT) is one of the stocks attracting the attention of institutional investors.
9. Chesapeake Energy Corporation (NASDAQ:CHK)
Number of Hedge Fund Holders: 43
Chesapeake Energy Corporation (NASDAQ:CHK) is ranked ninth on our list of 10 best oil stocks to buy according to hedge funds. The firm engages in the exploration and development of natural gas and oil properties. It is headquartered in Oklahoma.
On August 27, investment advisory BMO Capital reinstated coverage of Chesapeake Energy Corporation (NASDAQ:CHK) stock with an Outperform rating and a price target of $70, noting the firm would generate significant free cash outflow in the coming months.
At the end of the second quarter of 2021, 43 hedge funds in the database of Insider Monkey held stakes worth $1.9 billion in Chesapeake Energy Corporation (NASDAQ:CHK), up from 42 the preceding quarter worth $1.8 billion.
Out of the hedge funds being tracked by Insider Monkey, California-based investment firm Oaktree Capital Management is a leading shareholder in Chesapeake Energy Corporation (NASDAQ:CHK) with 11.9 million shares worth more than $619 million.
Along with Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and ConocoPhillips (NYSE:COP), Chesapeake Energy Corporation (NASDAQ:CHK) is one of the stocks that hedge funds are buying.
8. Pioneer Natural Resources Company (NYSE:PXD)
Number of Hedge Fund Holders: 45
Pioneer Natural Resources Company (NYSE:PXD) is a Texas-based independent oil and gas production firm. It is placed eighth on our list of 10 best oil stocks to buy according to hedge funds.
On September 9, investment advisory Goldman Sachs upgraded Pioneer Natural Resources Company (NYSE:PXD) stock to Conviction Buy from Buy with a price target of $196, noting that there were several catalysts for the firm going forward despite year-to-date underperformance.
At the end of the second quarter of 2021, 45 hedge funds in the database of Insider Monkey held stakes worth $876 million in Pioneer Natural Resources Company (NYSE:PXD), up from 37 the preceding quarter worth $623 million.
Out of the hedge funds being tracked by Insider Monkey, Wyoming-based investment firm Adage Capital Management is a leading shareholder in Pioneer Natural Resources Company (NYSE:PXD) with 1.2 million shares worth more than $206 million.
In addition to Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and ConocoPhillips (NYSE:COP), Pioneer Natural Resources Company (NYSE:PXD) is one of the stocks on the radar of elite investors.
7. Marathon Petroleum Corporation (NYSE:MPC)
Number of Hedge Fund Holders: 48
Marathon Petroleum Corporation (NYSE:MPC) is an Ohio-based firm that engages in the refining, marketing, retailing of petroleum products. It is ranked seventh on our list of 10 best oil stocks to buy according to hedge funds.
On September 16, investment advisory Piper Sandler kept an Overweight rating on Marathon Petroleum Corporation (NYSE:MPC) stock and raised the price target to $69 from $66, noting that the margins for the firm were showing continuous improvement.
At the end of the second quarter of 2021, 48 hedge funds in the database of Insider Monkey held stakes worth $2.6 billion in Marathon Petroleum Corporation (NYSE:MPC), up from 46 the preceding quarter worth $1.9 billion.
Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm Elliott Management is a leading shareholder in Marathon Petroleum Corporation (NYSE:MPC) with 10 million shares worth more than $638 million.
Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and ConocoPhillips (NYSE:COP) are some of the top oil stocks to buy now, just like Marathon Petroleum Corporation (NYSE:MPC).
6. Cheniere Energy, Inc. (NYSE:LNG)
Number of Hedge Fund Holders: 49
Cheniere Energy, Inc. (NYSE:LNG) is placed sixth on our list of 10 best oil stocks to buy according to hedge funds. The firm operates as an energy infrastructure company and is headquartered in Texas.
On October 6, investment advisory Barclays maintained an Overweight rating on Cheniere Energy, Inc. (NYSE:LNG) stock and raised the price target to $129 from $104. Christine Cho, an analyst at the advisory, issued the ratings update.
At the end of the second quarter of 2021, 49 hedge funds in the database of Insider Monkey held stakes worth $2.9 billion in Cheniere Energy, Inc. (NYSE:LNG), up from 40 in the previous quarter worth $2.5 billion.
Out of the hedge funds being tracked by Insider Monkey, Florida-based investment firm Icahn Capital LP is a leading shareholder in Cheniere Energy, Inc. (NYSE:LNG) with 16 million shares worth more than $1.4 billion.
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Disclosure. None. 10 Best Oil Stocks To Buy According To Hedge Funds is originally published on Insider Monkey.
