In this piece, we will take a look at the ten energy stocks to buy today according to Richard S. Pzena’s Pzena Investment Management. If you want to jump ahead to the top five stocks in this list, then head on over to 5 Energy Stocks to Buy Today According to Richard S. Pzena’s Hedge Fund.
Pzena Investment Management is an investment firm based out of New York, New York, United States. It is managed by Mr. Richard Pzena, who is the firm’s chief executive officer. Mr. Pzena has been at the helm of affairs of Pzena Investment for over two decades, after he founded the firm in November 1995.
Pzena Investment Management describes itself as a firm that specializes in sifting out undervalued companies from the countless others out there. This enables the company to buy stakes in its target companies before their share price appreciates to reflect its true value, and when it does, the investment firm’s stake appreciates corresponding to the share price.
Pzena Investment Management offers its investors several kinds of funds. These include U.S. based mutual funds, funds in Australia, and a category of funds dubbed as UCITS funds, which cover funds from several countries such as Finland, Germany, France, Spain, and the Netherlands.
The investment firm’s investment strategy involves performing bottom-up and fundamental research on its target companies. This enables it to determine their true worth, which according to financial theory, values a company’s future cash flows and after discounting them with an appropriate rate, compares the final value with the current price at which the companies are trading in the stock market.
Talking briefly about Mr. Pzena, the investor received his bachelor’s degree and his Master’s in Business Administration (MBA) from the illustrious Wharton Business School of the University of Pennsylvania in 1980. Before starting his 26-year journey at Pzena Investment Management, the executive worked at the financial firm Sanford C. Bernstein where he would go on to become its chief research officer. He has also worked at the former oil firm Amoco as an industry analyst. Amoco merged its operations with B.P. in 1998.
Digging through Pzena Investment’s $26 billion portfolio reveals that its top energy holdings are in Halliburton Company (NYSE:HAL), Edison International (NYSE:EIX), and General Electric Company (NYSE:GE). Additionally, some of the other well known companies that the firm has invested in include Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), Meta Platforms, Inc. (NASDAQ:FB), and Intel Corporation (NASDAQ:INTC).
Richard S. Pzena of Pzena Investment Management
Our Methodology
For determining which energy stocks are on Mr. Pzena’s radar, we took a look at Pzena Investment Management’s Form 13F filings with the Securities and Exchange Commission for the fourth quarter of last year.
10. TechnipFMC plc (NYSE:FTI)
Pzena Investment Management’s Stake Value: $124 million
Percentage of Pzena Investment Management’s 13F Portfolio: 0.46%
Number of Hedge Fund Holders: 25
TechnipFMC plc (NYSE:FTI) is an oil and gas infrastructure provider that designs, manufactures, and sells systems and subsystems that are used in oil and gas exploration. These include subsea production and processing systems, alongside providing terrain level wellheads and production systems.
Mr. Pzena’s investment firm owned 21 million TechnipFMC plc (NYSE:FTI) shares as the fourth quarter of last year came to an end. These were worth $124 million and represented 0.46% of its investment portfolio. During the same time period, 25 out of the 924 hedge funds polled by Insider Monkey also had a stake in the equipment company.
For its fiscal fourth quarter, TechnipFMC plc (NYSE:FTI) earned $1.5 billion in revenue and -$0.12 in non-GAAP EPS, disappointing Wall Street by missing analyst estimates for both. Kepler Cheuvreux increased the company’s price target to $10 from $8.30 in February 2022, outlining that while the fourth quarter results could have been better, the company has a strong order flow for subsea equipment.
TechnipFMC plc (NYSE:FTI)’s largest investor after Pzena Investment is John Overdeck and David Siegel’s Two Sigma Advisors which owns 7 million shares that are worth $41 million.
Meta Platforms, Inc. (NASDAQ:FB), Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), and Intel Corporation (NASDAQ:INTC) are joined by TechnipFMC plc (NYSE:FTI) as one of Pzena Investment Management’s top stock picks.
9. Cenovus Energy Inc. (NYSE:CVE)
Pzena Investment Management’s Stake Value: $125 million
Percentage of Pzena Investment Management’s 13F Portfolio: 0.47%
Number of Hedge Fund Holders: 40
Cenovus Energy Inc. (NYSE:CVE) is a Canadian developer and marketer of crude oil and natural gas. The company’s products include crude oil, bitumen, natural gas, heavy oil, diesel, jet fuel, and gasoline. The firm also has interests in natural gas processing facilities.
Cenovus Energy Inc. (NYSE:CVE) brought in CAD$13.7 billion in revenue and -CAD$0.21 in GAAP EPS for its fiscal Q4, missing analyst estimates for revenue. Scotiabank raised the company’s price target to CAD$24 from CAD$20 in March 2022. Additionally, it also kept an Outperform rating on the shares.
Mr. Pzena’s investment firm had a $125 million stake in Cenovus Energy Inc. (NYSE:CVE) by the end of Q4 2021. This was through owning 10 million shares and it represented 0.47% of the company’s stock. An Insider Monkey survey of 924 hedge funds for the fourth quarter of last year revealed that 40 had invested in the firm, an all time high since the start of 2013.
Eric W. Mandelblatt’s Soroban Capital Partners is Cenovus Energy Inc. (NYSE:CVE)’s largest investor through a $133 million stake via 10 million shares.
L1 Capital mentioned Cenovus Energy Inc. (NYSE:CVE) in its fourth quarter 2021 investor letter. Here is what the fund said:
“Detailed, bottom-up stock research remains the investment team’s primary focus and the core driver of portfolio performance. 2021 once again demonstrated the team’s ability to identify ‘winners’ through extensive company and industry research across a diverse range of sectors. Key contributors included Cenovus Energy, (due to) recovering oil price leading to improved investor sentiment, consensus earnings upgrades and strong free cashflow generation.”
8. Shell plc (NYSE:SHEL)
Pzena Investment Management’s Stake Value: $174 million
Percentage of Pzena Investment Management’s 13F Portfolio: 0.65%
Number of Hedge Fund Holders: 56
Shell plc (NYSE:SHEL) is one of the world’s largest oil companies. Given its scope, the company has its presence in every oil and gas segment, covering areas such as exploration, production, refinement, production, and distribution.
Pzena Investment Management owned 4 million Shell plc (NYSE:SHEL) shares during the fourth quarter of last year, which translated into a $174 million stake and constituted 0.65% of its investment portfolio. A Q4 2021 Insider Monkey poll of 924 hedge funds revealed that 56 also held a stake in the oil company.
Shell plc (NYSE:SHEL) surpassed Wall Street estimates for its fiscal fourth quarter, by posting $85 billion in revenue and $0.83 in non-GAAP EPS, which beat analyst estimates for both. The revenue beat was eye-popping, as it exceeded the estimates by a whopping $26.6 billion. BofA set a $66 price target for the company in February 2022, outlining that the strong quarterly results mark the beginning of a turnaround at the company.
Shell plc (NYSE:SHEL)’s largest investor according to Insider Monkey’s research is Ken Fisher’s Fisher Asset Management which owns 18.7 million shares worth $813 million.
Goehring & Rozencwajg Associates mentioned the company in its third quarter 2021 investor letter and stated that:
“Royal Dutch Shell’s ESG challenges continue unabated. A Dutch court ruled in May that Royal Dutch Shell must cut its CO2 output by 45% by 2030 to align their policies with the Paris Climate Accord. In a statement issued after the verdict, a Shell spokesperson acknowledged that “urgent action is needed on climate change and the company is accelerating efforts to reduce emissions.” If the pressure from the Dutch court system was not enough, an activist shareholder has proposed breaking the company apart to address ESG concerns. On October 27th, Third Point Management announced the following.
“If Shell pursues this type of strategy it would probably lead to an acceleration of carbon dioxide reduction. […] Breaking Shell into two operating units would create a standalone legacy energy business (upstream, refining, and chemicals) that could slow capex beyond what is has already promised, sell assets, and prioritize return of cash to shareholder which can be reallocated into low-carbon areas of the market.”
Shell plc (NYSE:SHEL) has already cut spending dramatically over the last decade. After having peaked at $39 bn in 2013, upstream capital spending fell to only $17 bn in 2020 – a drop of nearly 60%. Spending has barely recovered in the three quarters of 2021. A lack of spending has already impacted production. Proforma for the 2016 acquisition of BG Group, Shell’s total production has fallen 13% since capital spending peaked in 2013. These trends are accelerating: Shell’s production over the first nine months of 2021 have fallen 7% compared with the same period last year.
If Royal Dutch Shell’s upstream capital spending remains at today’s depressed levels, we estimate the company will only be able to replace 30% of production with new reserves and that production will fall 40% over the next nine years. If spending is further curtailed (as is being proposed), Shell’s oil and natural gas production would collapse – something that may have already started.”
7. Exxon Mobil Corporation (NYSE:XOM)
Pzena Investment Management’s Stake Value: $332 million
Percentage of Pzena Investment Management’s 13F Portfolio: 1.25%
Number of Hedge Fund Holders: 73
Exxon Mobil Corporation (NYSE:XOM) is another large energy company that is involved in crude oil and natural gas exploration and production.
Exxon Mobil Corporation (NYSE:XOM) earned $84.9 billion in revenue and $2.05 in non-GAAP EPS, which wooed Wall Street and let it beat analyst estimates for both metrics. MKM Partners raised the company’s price target to $84 from $81 in March 2022, stating that a high production outlook and gas prices stand to offset an increase in operating costs.
By the end of the fourth quarter of last year, Pzena Investment Management had a $332 million stake in the company through owning 5.4 million shares. During the same time period, out of the 924 hedge funds surveyed by Insider Monkey, 73 had also owned stakes in the company.
Exxon Mobil Corporation (NYSE:XOM)’s largest investor is Rajiv Jain’s GQG Partners which owns 32 million shares worth $1.9 billion.
Saturna Capital mentioned the company in its Q4 2021 investor letter. Here is what the firm said:
“Few companies maintain their position at the top for more than a decade or two. One that did was Exxon, which appeared decennially from 1980 through 2010. In 2019 it was ranked 10th, but as of writing has dropped to 39th place.”
6. Baker Hughes Company (NASDAQ:BKR)
Pzena Investment Management’s Stake Value: $549 million
Percentage of Pzena Investment Management’s 13F Portfolio: 2.07%
Number of Hedge Fund Holders: 73
Baker Hughes Company (NASDAQ:BKR) is an industrial service and equipment provider that deals with oil and gas companies. The company provides services for drilling, production, and other areas of oil exploration. Additionally, its equipment allows companies to produce oil on both offshore and onshore sites.
Mr. Pzena’s investment firm owned 22 million Baker Hughes Company (NASDAQ:BKR) shares by the end of the fourth quarter of last year. These were worth $549 million and represented 2.07% of its portfolio. Insider Monkey’s Q4 2021 survey of 924 hedge funds revealed that 35 had a stake in the company.
Baker Hughes Company (NASDAQ:BKR) posted $5.52 billion in revenue and $0.25 in non-GAAP EPS for its fiscal fourth quarter, beating analyst estimates for revenue only. UBS raised the company’s price target to $43 from $28 in March 2022, highlighting that growing energy requirements globally will help the company.
After Pzena Investment Management, Phill Gross and Robert Atchinson’s Adage Capital Management is Baker Hughes Company (NASDAQ:BKR)’s largest shareholder, suggests Insider Monkey’s research. It owns 1.5 million shares worth $37 million.
Along with Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), Meta Platforms, Inc. (NASDAQ:FB), and Intel Corporation (NASDAQ:INTC), Baker Hughes Company (NASDAQ:BKR) is one of Pzena Investment’s favorite stocks.
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Disclosure: None. 10 Energy Stocks to Buy Today According to Richard S. Pzena’s Hedge Fund is originally published on Insider Monkey.
