12 Hot Oil Stocks to Buy According to Hedge Funds

9. Magnolia Oil & Gas Corporation (NYSE:MGY)

Gain Over Past 12 Months: 35.36%

Number of Hedge Fund Holders: 28

Magnolia Oil & Gas Corporation (NYSE:MGY) is an independent oil producer with assets located in the Eagle Ford Shale and Austin Chalk formations in South Texas.

Magnolia Oil & Gas Corporation (NYSE:MGY)’s oil production during Q3 2024 was nearly 39,000 barrels per day, up 18% YoY. The company reported revenue of $333.14 million during the quarter, up 5.53% YoY and beating the analysts’ estimates by $7.31 million. Magnolia is also working to become more cost-efficient and spent $103 million drilling and completing wells during the third quarter, which is well below its capital guidance of $120 million. Moreover, the company’s implementation of field management software, which has reduced its cost for water hauling, will be further utilized to lower costs from other field services also into this year.

Magnolia Oil & Gas Corporation’s (NYSE:MGY) cost-saving measure led to improved free cash flow generation of $126 million during Q3 2024, allowing it to return $88 million or 70% of its free cash flow to shareholders through a combination of dividends and share repurchases. The company ended the quarter with $276.1 million of cash on the balance sheet and an undrawn revolving credit facility of $450 million. Magnolia further bolstered its financial stability by securing a $1.5 billion credit facility in November and announced plans for a private placement of $400 million in senior unsecured notes due 2032. The company has also recently appointed finance expert R. Lewis Ropp to its board of directors, a move that is expected to bring extensive financial expertise and industry insight to the table.

Diamond Hill Small Cap Fund stated the following regarding Magnolia Oil & Gas Corporation (NYSE:MGY) in its Q2 2024 investor letter:

“We continue finding attractively valued, resilient companies the market is overlooking amid its increasingly narrow focus on the mega-cap technology stocks dominating the major indices. In Q2, we initiated new positions in Magnolia Oil & Gas Corporation (NYSE:MGY), Thermon Group Holdings and Astrana Health.

Magnolia Oil & Gas is a small-cap exploration and production company based in the Eagle Ford shale region. The company has a strong and experienced management team with a disciplined capital-allocation framework, owner mindset and strong balance sheet. Further, the company’s low wellhead breakeven numbers and low debt levels make it an attractive, relatively lower-risk opportunity to gain exposure to the commodities cycle’s upside.”