In this article, we will cover the 10 most promising energy stocks according to hedge funds.
In the next decade, global power demand is expected to grow by over 30%, largely fueled by economic growth in emerging markets and the electrification of various sectors. Data centers and artificial intelligence are becoming major energy consumers, increasingly relying on renewable sources like solar and wind power. Although efforts to improve energy efficiency may help mitigate some of this demand, the Asia-Pacific region is projected to account for a significant portion of the increase, capturing 66% of the total growth in electricity demand.
In response to the rising demand, there is a strong focus on clean energy sources to meet environmental, social, and governance (ESG) goals, as well as to qualify for tax incentives, reshaping the entire industry. Renewable energy is projected to increase by more than 740 gigawatts each year from now until 2035. By that year, carbon-free resources, including renewables, hydropower, nuclear energy, and battery storage, are expected to make up 70% of the total installed generation capacity.
This shift is also driving significant investments and various initiatives across the industry. This includes renewable energy startups, traditional oil and gas companies, and associated manufacturing and technology firms. Investment in the energy transition is gaining momentum, with the US experiencing a 22% increase in 2023, reaching $303 billion. While this amount is substantial, it remains relatively small compared to the global total of $1.77 trillion.
Read Also: 7 Most Undervalued Renewable Energy Stocks To Buy Now and 13 Best Natural Gas and Oil Dividend Stocks To Buy.
In the United States, fossil fuels and nuclear power together account for 75% of energy production, while renewables contribute just under 25%. On a global scale, renewable sources now represent 30% of electricity generation.
Another emerging trend in the energy sector is the rise of mergers and acquisitions. According to Bloomberg, over $155 billion in deals were finalized in the fourth quarter of 2023 alone, exceeding the total from the previous five quarters combined. As companies face challenging market and economic conditions, consolidation within the oil and gas industry, particularly among upstream, midstream, and oil field services companies, is expected to continue.
Oil prices significantly influence the performance of energy stocks, leading to a volatile year for the sector. Stock prices have fluctuated in response to changing oil prices. Despite this volatility, there are still investment opportunities within the energy sector, including traditional oil and gas companies, midstream businesses, and firms focused on renewable energy. With this context in mind, let’s take a look at the 10 most promising energy stocks according to hedge funds.
A row of massive oil rigs in a desert landscape, against a setting sun.
Our Methodology
To shortlist the 10 most promising energy stocks, we used stock screeners like Yahoo Finance and Finviz to identify the largest energy companies. From there, we refined our selections to 10 stocks based on hedge fund sentiment using our database of 912 top hedge funds as of Q2 2024. The most promising energy stocks have been ranked in ascending order of the number of hedge funds holding a stake in them.
Note: Although the theme of the article is Oil and Gas stocks, we’ve also added renewable energy stocks since many oil and gas companies are also diversifying in renewable energy.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Most Promising Energy Stocks According to Hedge Funds
10. First Solar, Inc. (NASDAQ:FSLR)
Number of Hedge Fund Holders: 66
First Solar, Inc. (NASDAQ:FSLR) is a prominent player in the US solar power industry, renowned for its innovative photovoltaic panels. Founded in 1999, the company has established itself as a leading producer of these essential components for solar installations. With approximately 25 gigawatts of installed generation capacity and a growing backlog, First Solar, Inc. (NASDAQ:FSLR) is well-positioned to expand its market share.
By the end of 2023, the company’s contracted backlog stood at 78.3 gigawatts, valued at $23.3 billion. By March 31, 2024, an additional 2.7 gigawatts of new contracts had been signed, with 2.7 gigawatts in sales volume recorded. The updated backlog value reached $23.4 billion, reflecting an approximate average selling price of $0.299 per watt, excluding adjusters.
The company’s commitment to technological advancement is evident in its significant investments in research and development. Its cadmium telluride technology is considered an improvement over traditional silicon panels, setting a new benchmark for panel quality.
First Solar, Inc. (NASDAQ:FSLR) also delivered strong financial performance, with its second-quarter 2024 results exceeding expectations. The company reported a revenue of $1 billion and earnings per share of $3.25, surpassing analyst estimates. This positive financial outlook, coupled with a substantial sales backlog, indicates a promising future for First Solar, Inc. (NASDAQ:FSLR). The stock has received an average “Strong Buy” rating.
9. Schlumberger Limited (NYSE:SLB)
Number of Hedge Fund Holders: 67
Schlumberger Limited (NYSE:SLB) is a Texas-based energy technology company that provides a comprehensive range of services to improve hydrocarbon production and field development. Its offerings include carbon management solutions and the integration of energy systems. The company’s expertise covers various aspects of the energy industry, including reservoir interpretation, well construction services, and subsurface geology evaluations.
Schlumberger Limited (NYSE:SLB) recently announced its Q2 2024 results, with revenue reaching $9.14 billion, a 13% increase year-over-year. Net income was $1.11 billion, up 8% from Q2 2023, and earnings per share came in at $0.85, beating expectations. The company credited growth to strong performance in its international markets and increased demand for oilfield services.
Jim Cramer recently shared his thoughts on the stock, stating:
“SLB has not gone up nearly as much as I would’ve expected. Given the fact that oil’s up, I would buy the stock right here. It is the best of breed.”
Due to its decent financial performance and expansion in international markets, the stock has gained an average rating of “Strong Buy.”
8. Constellation Energy Corporation (NASDAQ:CEG)
Number of Hedge Fund Holders: 71
Constellation Energy Corporation (NASDAQ:CEG) is a prominent energy provider based in Baltimore, specializing in clean, carbon-free energy solutions. As the largest producer of this type of energy in the United States, Constellation Energy Corporation (NASDAQ:CEG) serves a vast customer base, including major corporations, households, businesses, and government agencies.
The company’s portfolio, which is nearly 90% carbon-free, consists of hydro, wind, solar, and nuclear power, capable of powering approximately 16 million homes. Recently, Constellation Energy Corporation (NASDAQ:CEG) entered into a new agreement with Microsoft to supply clean energy for the tech giant’s cloud computing and AI data centers.
This partnership could potentially lead to the reopening of the Three Mile Island nuclear plant. The nuclear plant will supply electricity to Microsoft’s data centers, generating significant revenue for Constellation Energy Corporation (NASDAQ:CEG). The stock has received a consensus rating of “Moderate Buy.”
Here’s what ClearBridge Investments said about Constellation Energy Corporation (NASDAQ:CEG) in its Q1 2024 investor letter:
“On a regional basis, the U.S. and Canada was the top contributor for quarter, with U.S. electric utility Constellation Energy Corporation (NASDAQ:CEG) and U.S. rail operator CSX the lead performers. Constellation Energy is primarily a nuclear generation company and is the largest producer of carbon-free electricity in the U.S., serving states including New York, Illinois, Maryland, Pennsylvania and New Jersey. The company’s combined generation capacity is more than 32 GW and 90% of annual output is carbon free. Constellation has been a beneficiary of AI and subsequent power demand as its 24/7 base load nuclear generation can get premium contracts.”
7. ConocoPhillips (NYSE:COP)
Number of Hedge Fund Holders: 72
ConocoPhillips (NYSE:COP) is a major player in the global energy industry, operating a diverse range of conventional and unconventional assets across North America, Europe, and Asia. The company’s balanced portfolio positions it to effectively navigate and benefit from the evolving energy market landscape.
ConocoPhillips (NYSE:COP) recently announced plans to acquire Marathon Oil in an all-stock transaction valued at $22.5 billion. This strategic move positions ConocoPhillips (NYSE:COP) to capitalize on current market trends and the company expects to achieve at least $500 million in cost and capital savings within the first full year after the transaction closes.
In Q2, ConocoPhillips (NYSE:COP) reported strong performance, with production reaching 1,945 MBOED, an 8% year-over-year increase, and an average petroleum price of $81.30 per barrel—10% higher than the previous year. The stock has received a consensus “Strong Buy” rating from analysts.
Here’s what Invesco Growth and Income Fund said about ConocoPhillips (NYSE:COP) in its Q2 2024 investor letter:
“Stock selection in the industrials and health care sectors detracted from relative performance during the quarter. Selection and an underweight in consumer staples also hurt relative return as the sector was one of just two index sectors with a positive return for the quarter. ConocoPhillips (NYSE:COP): The company announced its acquisition of Marathon Oil in May. The deal is expected to increase earnings and will increase the scale of Conoco’s production assets. However, the stock traded lower on the news.”
6. NextEra Energy, Inc. (NYSE:NEE)
Number of Hedge Fund Holders: 73
NextEra Energy, Inc. (NYSE:NEE) is a leading North American energy company involved in generating, transmitting, and distributing electricity to residential and commercial customers. The company’s two primary subsidiaries, Florida Power & Light (FPL) and NextEra Energy Resources, drive its operations.
NextEra Energy, Inc. (NYSE:NEE) reported strong second-quarter 2024 results, with earnings per share increasing by over 9% year-over-year. The company’s renewable energy business, NextEra Energy Resources, achieved its second-best quarter for new project origination, adding over 3,000 megawatts to its backlog.
Meanwhile, FPL, the company’s regulated utility subsidiary, continued to invest in infrastructure and deliver outstanding value to customers. NextEra Energy, Inc. (NYSE:NEE) maintained its long-term financial expectations and reaffirmed its commitment to a 10% annual dividend increase.
NextEra Energy, Inc.’s (NYSE:NEE) strategic focus on renewables as well as its financial performance has driven analysts to give the company an average rating of “Moderate Buy”
Here’s what ClearBridge Investments said about NextEra Energy, Inc. (NYSE:NEE) in its Q2 2024 investor letter:
“Electric utilities were the top contributors for the quarter, with U.S. utilities NextEra Energy, Inc. (NYSE:NEE) and Public Services Enterprise Group (PEG) the lead performers. NextEra Energy is an integrated utility business with a regulated utility operating in Florida and is the largest wind business in the U.S. NextEra’s regulated business, including Florida Power & Light, serves nine million people in Florida. Shares benefited from a positive readthrough to power and renewables demand as a result of data center growth from AI.”
5. Hess Corporation (NYSE:HES)
Number of Hedge Fund Holders: 73
Hess Corporation (NYSE:HES) is a US-based independent energy company engaged in the exploration, development, production, purchase, transport, and sale of crude oil, natural gas liquids (NGLs), and natural gas on a global scale.
Hess Corporation (NYSE:HES) has kept a steady dividend payment record since 1987. Recently, the company announced an increase in the quarterly dividend to 50 cents per share, marking a 14.3% increase from the previous dividend.
The company is set to be acquired by Chevron (NYSE:CVX) for $53 billion. This acquisition aligns with the broader trend of major energy companies expanding their shale oil production footprint in the United States. Hess Corporation (NYSE:HES) shareholders will receive 1.025 Chevron (NYSE:CVX) shares for each of their Hess Corporation (NYSE:HES) shares, making the deal attractive for investors. The company’s stock has been rated a “Moderate Buy.”
Bailard Inc. was the leading hedge fund investor in the company as of Q2 2024, with a stake worth over $2.5 million.
4. Vistra Corp. (NYSE:VST)
Number of Hedge Fund Holders: 92
Vistra Corp. (NYSE:VST) is a prominent energy company that offers electricity and power generation services. As one of the largest competitive power generators in the US, the company’s growth has been driven by advancements in artificial intelligence and increased interest from investors in dividend stocks.
Vistra Corp. (NYSE:VST) presents an attractive investment opportunity as a significant player in the AI sector. While semiconductors are commonly linked to AI, the rising demand for energy-intensive data centers has sparked interest in more sustainable power sources. Nuclear energy stands out as a viable option, and Vistra Corp.’s (NYSE:VST) ownership of four nuclear reactors, acquired through its purchase of Energy Harbor, positions the company to benefit from this trend.
Vistra Corp. (NYSE:VST) has received an average rating of “Strong Buy” from analysts. In a recent episode of Mad Money, Jim Cramer also discussed the stock, expressing his belief that Vistra Corp. is likely to “go higher.” You can check out Jim Cramer’s Latest Stock Picks here.
Here’s what Fidelity Growth Strategies Fund said about Vistra Corp. (NYSE:VST) in its Q2 2024 investor letter:
“An overweight stake in utility company Vistra Corp. (NYSE:VST) (+24%) was the top individual relative contributor. In Q1, the Texas-based independent power producer completed its acquisition of Ohio-based nuclear fleet operator Energy Harbor. The new Vistra, with its expanded geographic footprint, is in strong position to gain from the buildout of AI-capable data centers, which require enormous amounts of power to run. It is expected that local grids in the U.S. will need to invest heavily over the coming years to improve their power infrastructure and meet growing demand. In the nearer term, firms may choose to contract with independent power producers, like Vistra, rather than rely on the local provider.”
3. GE Vernova Inc. (NYSE:GEV)
Number of Hedge Fund Holders: 92
GE Vernova Inc. (NYSE:GEV), a newly formed independent company spun off from General Electric, is a leading player in the electric power industry. The company specializes in manufacturing energy equipment and providing support services, with a strong emphasis on sustainable energy solutions. GE Vernova aims to achieve carbon neutrality in its operations by 2030.
GE Vernova Inc. (NYSE:GEV) contributes to about 25% of the world’s electricity generation, supported by its extensive technology base, which includes roughly 55,000 wind turbines and 7,000 gas turbines. This positions the company as a key player in the energy transition.
Since going public, the company has posted strong financial results, reporting $8.2 billion in revenue for Q2 2024 and total orders of $11.8 billion, along with a decent increase in its cash balance since the spinoff. These solid results and market position have led analysts to be optimistic about the stock. Currently, analysts have assigned GE Vernova Inc. (NYSE:GEV) an average rating of “Strong Buy” and a 12-month average price target of $285.3, suggesting a potential upside of over 7% from the current price levels.
Here’s what Carillon Tower Advisers said about GE Vernova Inc. (NYSE:GEV) in its Q2 2024 investor letter:
“GE Vernova is a global electric power company that was recently spun out of a much larger industrial conglomerate. The company’s shares performed well in their first quarter as a standalone compa- ny, primarily as a result of the increasing outlook for power demand growth, both domestically and abroad. We believe GE Vernova is well positioned to capitalize on this growing trend across its various products and services, but most notably within its large-scale gas turbine equipment and related services, as well as in its high-volt- age electrical transmission products.”
2. Exxon Mobil Corporation (NYSE:XOM)
Number of Hedge Fund Holders: 92
Exxon Mobil Corporation (NYSE:XOM), headquartered in Houston, Texas, is a multinational energy giant with a diversified portfolio of assets spanning the oil and gas industry. The company’s upstream business covers exploration and production activities, while its downstream operations include refining and the manufacturing of chemicals and specialty products. The company ranks highly among the list of most promising energy stocks according to hedge funds.
Exxon Mobil Corporation’s (NYSE:XOM) upstream segment remains its primary profit driver, accounting for more than 70% of the earnings in Q2 2024. To strengthen this segment, Exxon Mobil Corporation (NYSE:XOM) acquired Pioneer Natural Resources for nearly $60 billion in November 2023. This acquisition is expected to increase its momentum in the Permian Basin, potentially doubling output to 2 million barrels per day (Moebd) by 2027.
With these strategic moves, the company is well-positioned for future growth and has earned an average rating of “Moderate Buy” from analysts.
Here’s what Madison Dividend Income Fund said about Exxon Mobil Corporation (NYSE:XOM) in its Q1 2024 investor letter:
“This quarter we are highlighting Exxon Mobil Corporation (NYSE:XOM) as a relative yield example in the Energy sector. XOM is a leading integrated oil and natural gas company. It has upstream assets that develop and produce oil and natural gas, along with downstream refining and chemical manufacturing assets. We believe it has attractive low-cost acreage in the Permian basin and has a sizeable growth opportunity in Guyana. Further, we think XOM has a sustainable competitive advantage due to size and scale, and its ability to integrate refining and chemical assets provides a low-cost advantage versus competitors.
Our thesis on XOM is that it will grow production volumes of oil and gas moderately over the next few years, while limiting excessive capital investment that plagued the industry from 2014-2020. Production growth will come from its 2023 acquisition of Pioneer Natural Resources, which is the largest producer in the Permian basin. XOM plans to double its Permian output by 2027, to 2 million barrels per day. Capital spending will be limited to $20-25 billion per year through 2027, which should allow for significant amounts of cash to be returned to shareholders including a $35 billion share repurchase program and continued dividend increases. Higher oil prices would provide a tailwind to our thesis but are not necessary. We think XOM can grow earnings and cash flow if oil prices remain above $60 per barrel…” (Click here to read the full text)
1. Eaton Corporation Plc (NYSE:ETN)
Number of Hedge Fund Holders: 93
Eaton Corporation Plc (NYSE:ETN) operates in over 175 countries, offering innovative solutions for managing electrical, hydraulic, and mechanical power across various industries, including data centers, utilities, and transportation. The company has a long-standing commitment to shareholder value, as shown by its continuous dividend payments since 1923.
Eaton Corporation Plc (NYSE:ETN) reported strong second-quarter 2024 results, showcasing 9% organic sales growth and a 33% increase in earnings per share compared to 2023, driven by stable orders and strategic initiatives. This performance has drawn interest from investors, leading to a significant rise in the number of hedge fund holders in recent quarters. Running Oak Capital increased its stake in the company by 19% during Q2 2024.
Analysts are optimistic about Eaton Corporation Plc’s (NYSE:ETN) long-term outlook and have assigned an average rating of “Moderate Buy” with a 12-month price target of $353.7. The price target reflects a potential upside of over 3% from its current price levels.
Here’s what Carillon Tower Advisers said about Eaton Corporation Plc (NYSE:ETN) in its Q1 2024 investor letter:
“Eaton Corporation plc (NYSE:ETN) traded higher after announcing better than expected quarterly results as well as providing guidance that was ahead of expectations for the fiscal year. The electrical power equipment company also announced a proactive multi-year restructuring program, enabling Eaton to continue growing while also reducing costs.”
Overall, Eaton Corporation Plc (NYSE:ETN) ranks first among the 10 most promising energy stocks according to hedge funds. While we acknowledge the potential of energy companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ETN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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