In this article, we will be taking a look at the 10 energy stocks to buy before winter. To skip our detailed analysis of the energy sector and the prospective future demand for these stocks, you can go directly to see the 5 Energy Stocks to Buy Before Winter.
In February 2022, the Russian Federation invaded Ukraine, leading to an ongoing global crisis of pandemic proportions. The invasion and resulting war have since become a cause for concern in all areas, including the global markets. According to the World Bank, as cited by the Guardian, the war will lead to rising food and energy prices over the next three years, returning the world to a state of high inflation that rivals the 1970s. The World Bank forecasts a 50% increase in energy prices in 2022, directly caused by the Russian invasion. Brent crude oil is expected to average about $100 a barrel this year, showcasing an over 40% increase compared to the price in 2021. Energy costs may thus continue skyrocketing, especially this winter.
While the significant increase in energy prices is no cause to celebrate for the average person, major energy companies like Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and Devon Energy Corporation (NYSE:DVN) are set to benefit from these developments. As of this July, the S&P 500 energy sector remained one of the few sectors to flourish this year, being up 20% year-to-date, according to Reuters. In comparison, the broader benchmark index has fallen by 19.8% year-to-date. The pandemic also added to a surge in oil prices, bringing the price of U.S. crude oil up to $130 per barrel in March. The Russo-Ukrainian war has since added fuel to the fire by further tightening the energy market. Energy stocks have thus become a top investment option for many investors looking to lock in gains.
According to the Wall Street Journal earlier this year, 17 out of the 25 best-performing stocks in the S&P 500 in 2022 were from the energy sector. While the rest of the market was floundering this year, investors began eyeing energy stocks for better returns and dividends. The energy sector’s 2.9% dividend yield, when compared to the 1.3% yield of the S&P 500 as a whole, has further increased the sector’s popularity. As such, now seems the best time to begin investing in energy stocks before prices skyrocket again this winter. With that in mind, let’s take a look at the 10 energy stocks to buy before winter.
Photo by Jason Blackeye on Unsplash
Our Methodology
We have selected some of the top names in the energy sector for our list below, based on their popularity among the 895 hedge funds Insider Monkey tracks that filed 13Fs for the second quarter. The stocks are ranked based on the number of hedge funds holding stakes in them, from the lowest to the highest. We have also mentioned several key metrics that often signal positive or negative stock performance, such as the companies’ latest earnings results, their growth potential over the next three to five years, and the analyst ratings and price targets on their shares.
Energy Stocks to Buy Before Winter
10. TotalEnergies SE (NYSE:TTE)
Number of Hedge Fund Holders: 20
TotalEnergies SE (NYSE:TTE) is an integrated oil and gas company operating worldwide. The company operates through its Integrated Gas, Renewables & Power, Exploration & Production, Refining & Chemicals, and Marketing & Services segments. It is engaged in liquefied natural gas production, shipping, trading, and regasification activities, among others. An ‘Outperformer’ rating was reiterated on TotalEnergies SE (NYSE:TTE) shares on August 10, by BMO Capital’s John Gibson.
This July, TotalEnergies SE’s (NYSE:TTE) second-quarter profit surged after the company sold a 50% stake in its fuel distribution business in Egypt. The sale totaled $186 million with an additional contingency payment of about $17.3 million. TotalEnergies SE’s (NYSE:TTE) net profit for the second quarter rose 2.6x as a result, to about $5.7 billion. Its revenue also jumped by 59% to $74.8 billion. The company also raised its dividend by 5% year-over-year, and its second-quarter net cash flow came in at $8.3 billion.
There were 20 hedge funds long TotalEnergies SE (NYSE:TTE) in the second quarter, with a total stake value of $1.9 billion. Of those hedge funds, Fisher Asset Management was the largest stakeholder in the company, holding 26.9 million shares worth $1.4 billion.
TotalEnergies SE (NYSE:TTE), like Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and Devon Energy Corporation (NYSE:DVN), is among the most renowned energy stocks hedge funds are eyeing today.
9. Enbridge Inc. (NYSE:ENB)
Number of Hedge Fund Holders: 25
Enbridge Inc. (NYSE:ENB) is an oil and gas storage and transportation company. It operates through its Liquids, Pipelines, Gas Transmission and Midstream, Gas Distribution and Storage, Renewable Power Generation, and Energy Services segments. The company operates pipelines and related terminals for the transportation of various grades of crude oil and other liquid hydrocarbons in Canada and the U.S. On August 2, Michael Shaw, an analyst at Raymond James, reiterated a ‘Market Perform’ rating on Enbridge Inc. (NYSE:ENB) shares.
This month, Enbridge Inc. (NYSE:ENB) completed a joint venture merger with Phillips 66. The company believes the move will increase its distributable cash flow per share, and lead to a $400 million cash payment to the company. Enbridge Inc.’s (NYSE:ENB) $10.3 billion in revenue during the second quarter also showed growth of 17.6% year-over-year, and beat estimates by $711 million.
In the second quarter of 2022, 25 hedge funds held stakes in Enbridge Inc. (NYSE:ENB), with a total stake value of $2.4 billion. In comparison, 24 hedge funds were long the stock in the previous quarter, with a total stake value of $2.3 billion.
8. BP plc (NYSE:BP)
Number of Hedge Fund Holders: 27
BP plc (NYSE:BP) is an integrated oil and gas energy company based in London, UK. The company operates through its Gas & Low Carbon Energy, Oil Production & Operations, Customers & Products, and Rosneft segments. It produces and trades in natural gas, while also offering biofuels and operating onshore and offshore wind power, among other services. Morgan Stanley analyst Martjin Rats holds an ‘Overweight’ rating on BP plc (NYSE:BP) shares as of August 23.
In the second quarter, BP plc (NYSE:BP) had EPS of $2.61, beating estimates by $0.48. The company’s revenue was $67.9 billion, up 86.1% year-over-year and also beating estimates by $7 billion. The company’s EPS is expected to grow by a further 2% over the next three to five years.
Arrowstreet Capital was the largest stakeholder in BP plc (NYSE:BP) as of the close of the second quarter, when a total of 27 hedge funds were long the stock. The fund held 26.5 million shares in the company, worth $750 million.
Just like Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and Devon Energy Corporation (NYSE:DVN), BP plc (NYSE:BP) is an energy stock to invest in before this winter.
7. Coterra Energy Inc. (NYSE:CTRA)
Number of Hedge Fund Holders: 40
Coterra Energy Inc. (NYSE:CTRA) is an independent oil and gas company working to develop, explore, and produce oil, natural gas, and natural gas liquids. The company operates primarily in the U.S. and focuses on the Marcellus Shale. It has about 177,000 net acres in the dry gas window of the play in Susquehanna County, Pennsylvania.
Mizuho’s analyst Vincent Lovaglio holds a ‘Buy’ rating on Coterra Energy Inc.’s (NYSE:CTRA) shares as of August 23. The analyst also raised his price target on the shares from $40 to $43.
Coterra Energy Inc.’s (NYSE:CTRA) EPS in the second quarter of 2022 was $1.35, beating estimates by $0.12. Its revenue was $2.6 billion, up 692% year-over-year and beating estimates by $361 million. Coterra Energy Inc.’s (NYSE:CTRA) EPS is expected to grow by 55% over the next three to five years, while its one-year dividend growth rate currently stands at 283%.
Out of the 895 hedge funds tracked in the second quarter that filed 13Fs, 40 funds were long Coterra Energy Inc. (NYSE:CTRA), while 39 funds were long the stock in the previous quarter. Their total stake values were $437 million and $552 million respectively.
6. Valero Energy Corporation (NYSE:VLO)
Number of Hedge Fund Holders: 43
Valero Energy Corporation (NYSE:VLO) is an oil and gas refining and marketing company. It manufactures, markets, and sells transportation fuels and petrochemical products in the U.S., Canada, the UK, Ireland, and internationally. The company operates through its Refining, Renewable Diesel, and Ethanol segments.
Theresa Chen at Barclays reiterated an ‘Overweight’ rating on Valero Energy Corporation (NYSE:VLO) shares on August 16. Chen also raised her price target on the stock from $133 to $139.
Valero Energy Corporation’s (NYSE:VLO) second-quarter net income attributable to shareholders jumped to a record of $4.7 billion. That represented a significant rise year-over-year, given that net income was just $162 million in the year-ago quarter. The company’s revenue also nearly doubled year-over-year during the latest quarter, to $51.6 billion. Valero Energy Corporation’s (NYSE:VLO) stock price return stood at a 58% gain year-to-date and an 87% gain across the past year, as of August 24.
Our hedge fund data for the second quarter shows 43 hedge funds long Valero Energy Corporation (NYSE:VLO), with a total stake value of $760 million. Millennium Management was the largest stakeholder in the company, holding 1.89 million shares worth $201 million.
Valero Energy Corporation (NYSE:VLO), like Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and Devon Energy Corporation (NYSE:DVN) is set to skyrocket when demand for energy sources rises in the winter.
Click to continue reading and see the 5 Energy Stocks to Buy Before Winter.
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Disclosure: None. 10 Energy Stocks to Buy Before Winter is originally published on Insider Monkey.
