In this article, we discuss 5 best-performing energy stocks of 2022. If you want to see more stocks in this selection, click 10 Best-Performing Energy Stocks of 2022.
5. Devon Energy Corporation (NYSE:DVN)
Number of Hedge Fund Holders: 57
YTD Share Price Gain as of September 15: 73.30%
Devon Energy Corporation (NYSE:DVN) is an Oklahoma-based independent energy company that explores for and distributes oil, natural gas, and natural gas liquids in the United States. On September 5, Devon Energy Corporation (NYSE:DVN) announced that it has entered into a LNG export partnership with Delfin Midstream. The agreement provides Devon Energy Corporation (NYSE:DVN) up to 2 million tons per annum of total liquefaction capacity on a long-term basis. The agreement also opens up room for future equity investments in Delfin by Devon Energy Corporation (NYSE:DVN). Year to date, Devon Energy Corporation (NYSE:DVN) stock has gained about 73% as of September 15.
JPMorgan analyst Arun Jayaram on September 15 downgraded Devon Energy Corporation (NYSE:DVN) to Neutral from Overweight with a price target of $83. The analyst said the downgrade is “essentially a valuation call” as Devon Energy Corporation (NYSE:DVN) has been making “all of the right moves in terms of capital allocation and execution in the field”.
Among the hedge funds tracked by Insider Monkey, 57 funds were bullish on Devon Energy Corporation (NYSE:DVN) at the end of Q2 2022, compared to 66 funds in the previous quarter. Rajiv Jain’s GQG Partners is the biggest stakeholder of the company, with roughly 15 million shares worth $822 million.
GoodHaven Capital Management released its second-quarter 2022 investor letter and mentioned Devon Energy Corporation (NYSE:DVN). Here is what it said:
“Our biggest dollar gainer within this period was Devon Energy Corporation (NYSE:DVN), a position which emanated from a takeover in early 2021 of our long time holding WPX Energy. We are sitting on a material (unrealized) gain from our cost and are now receiving material dividends thanks to Devon’s thoughtful fixed/variable dividend policy. Energy is now a hot sector for investors but we have had a material exposure for a long time. We remember a bit too well $40 oil, NEGATIVELY PRICED front-month oil contract, and what it’s like to own a company with leverage and negative free cash flow during such periods. Our desire to have our biggest portfolio exposures be high return, growing, reasonably predictable and moderately levered companies lead us to reduce our Devon exposure in the past. When the recent facts and circumstances for the industry changed and appeared supportive of healthy oil prices, we decided to maintain a sizable holding and more recently added to the position. At Devon’s Q1 dividend rate, which is mostly variable in nature, the shares now yield approximately 10% and our yield on our average cost is materially higher. In addition, we maintain additional energy exposure through our long-term (and successful) holding in Hess Midstream and less directly through TerraVest and Berkshire Hathaway’s energy investments.”
4. Chesapeake Energy Corporation (NASDAQ:CHK)
Number of Hedge Fund Holders: 67
YTD Share Price Gain as of September 15: 73.96%
Chesapeake Energy Corporation (NASDAQ:CHK) is an independent exploration and production company that distributes oil, natural gas, and natural gas liquids from underground reservoirs in the United States. Chesapeake Energy Corporation (NASDAQ:CHK) reported on August 2 market-beating Q2 results, with a GAAP EPS of $8.27 and a revenue of $2.79 billion, exceeding Street predictions by $4.40 and $22.40 million, respectively. Chesapeake Energy Corporation (NASDAQ:CHK) stock has climbed about 74% year to date as of September 15, making it one of the best performing energy stocks of 2022.
On August 1, Benchmark analyst Subash Chandra initiated coverage of Chesapeake Energy Corporation (NASDAQ:CHK) with a Buy rating and a $137 price target. The company has emerged from bankruptcy to pursue a long-term return-of-capital model “that is not fully appreciated in the company’s discount multiple to the E&P sector,” the analyst told investors. Chesapeake Energy Corporation (NASDAQ:CHK) has purchased assets worth $5 billion in the last six months that have advanced the company’s capital intensity and require “proportionately less capital to maintain higher production volumes”, the analyst added.
According to Insider Monkey’s Q2 data, 67 hedge funds were bullish on Chesapeake Energy Corporation (NASDAQ:CHK), up from 59 funds in the earlier quarter. Howard Marks’ Oaktree Capital Management is a leading position holder in the company, with 10.5 million shares worth $851.6 million.
Here is what ClearBridge Investments Dividend Strategy has to say about Chesapeake Energy Corporation (NYSE:CHK) in its Q1 2022 investor letter:
“In the early days of the invasion, we made two measured changes to the portfolio based on longer-term fallout we anticipate from Russia’s invasion of Ukraine. First, we initiated small positions in U.S. natural gas producers Chesapeake (NYSE:CHK).
Given its superior environmental profile compared to other fossil fuels, we have long favored natural gas in our energy holdings. Combustion of natural gas releases 50% less CO2 than coal, 25% less CO2 than gasoline and dramatically less particulate and pollution, per the U.S. Energy Information Administration. With the advances in shale production this century, the U.S. has become a natural gas powerhouse with some of the lowest-cost and largest reserves in the world. But because natural gas is difficult to ship across the ocean (it must be liquefied, which requires expensive infrastructure on both ends of the voyage), America’s gas bounty has ironically proved a burden for U.S. producers.
The surplus of natural gas in North America has resulted in low prices and weak earnings for gas-focused producers. Exports, while growing, are restrained by the high cost of building export infrastructure. Europe, in a Faustian bargain, has relied on abundant, inexpensive Russian gas transported by pipeline.
Despite the abundance of low-cost resources and a superior environmental profile, the investment case for U.S. natural gas producers was previously unfavorable due to oversupply in the domestic market.
In the days preceding the invasion, we were quick to realize the war would change global energy flows. Europe is shifting away from Russia and toward new sources of imported liquified natural gas. We purchased our stakes in Chesapeake to capitalize on these trends. The recently announced energy pact between the U.S. and Europe represents an early positive datapoint in support of this investment thesis.”
3. Hess Corporation (NYSE:HES)
Number of Hedge Fund Holders: 35
YTD Share Price Gain as of September 15: 74.25%
Hess Corporation (NYSE:HES) is a New York-based exploration and production company that explores, develops, and transports crude oil, natural gas liquids, and natural gas. On September 7, Hess Corporation (NYSE:HES) declared a $0.375 per share quarterly dividend, in line with previous. The dividend is distributable on September 30, to shareholders of record on September 19. Hess Corporation (NYSE:HES) stock has returned about 74.25% to shareholders year to date as of September 15.
Barclays analyst Jeanine Wai on August 31 maintained an Overweight rating on Hess Corporation (NYSE:HES) but lowered the price target on the shares to $146 from $149. The “knee-jerk reaction” to the Alternative Minimum Tax reaching tax “safe-haven” E&P firms is understandably negative on an absolute basis, but the scenario is not as bad as feared as the companies maintain their “top-tier” free cash flow yields, the analyst wrote in a research note to investors.
According to Insider Monkey’s Q2 data, 35 hedge funds were long Hess Corporation (NYSE:HES), compared to 40 funds in the preceding quarter. Adage Capital Management is a prominent stakeholder of the company, with 2.5 million shares worth $270 million.
2. Occidental Petroleum Corporation (NYSE:OXY)
Number of Hedge Fund Holders: 66
YTD Share Price Gain as of September 15: 133.30%
Occidental Petroleum Corporation (NYSE:OXY) is a Texas-based oil and gas company operating in the United States, the Middle East, Africa, and Latin America. Occidental Petroleum Corporation (NYSE:OXY) is one of the best performers in the energy sector, with the stock gaining 133.30% year to date as of September 15.
On September 12, Piper Sandler analyst Ryan Todd maintained an Overweight rating on Occidental Petroleum Corporation (NYSE:OXY) but lowered the price target on the shares to $92 from $93. The analyst remains constructive on the integrated oils, noting that despite some upside risk to upstream cost inflation, he sees no change to strategic priorities across the upstream companies he covers.
Among the hedge funds tracked by Insider Monkey, 66 funds were bullish on Occidental Petroleum Corporation (NYSE:OXY) at the end of the second quarter of 2022, compared to 67 funds in the preceding quarter. Warren Buffett’s Berkshire Hathaway is the biggest position holder in Occidental Petroleum Corporation (NYSE:OXY), with a 20% stake in the organization.
Here’s how Smead Capital Management mentioned Occidental Petroleum Corporation (NYSE:OXY) in its Q2 2022 investor letter:
“For the quarter, our best-performing stocks were Continental Resources (CLR), Merck (MRK) and Occidental Petroleum Corporation (NYSE:OXY). Despite a steep sell-off in June in the oil and gas stocks, two of our oil stocks made the quarterly list.
If you are wondering how we are outperforming the S&P 500 Index in the first half of the year, look no further than our top three performers. Occidental Petroleum (OXY), Continental Resources (CLR) and ConocoPhillips (COP) soared in value and were barely represented in the S&P 500 Index. To quote Jerry Jones, owner of the Dallas Cowboys, “We are in the first quarter on higher energy prices!””
1. Antero Resources Corporation (NYSE:AR)
Number of Hedge Fund Holders: 64
YTD Share Price Gain as of September 15: 139.30%
Antero Resources Corporation (NYSE:AR) is a Colorado-based independent oil and natural gas company. It is included on our list of the best performing energy stocks of 2022 as the shares have climbed 139% year to date as of September 15.
On August 18, Mizuho analyst Vincent Lovaglio reaffirmed a Buy rating on Antero Resources Corporation (NYSE:AR) but lowered the price target on the shares to $49 from $53. The analyst said his larger thesis for the exploration and production sector remains intact after the Q2 results. Structural undersupply, driven by consistent underinvestment, should continue to lead greater than expected commodity prices and higher than anticipated cash returns, making the sector a relatively good value versus the broader market, the analyst told investors in a research note.
According to Insider Monkey’s data, Antero Resources Corporation (NYSE:AR) was part of 64 hedge fund portfolios at the end of Q2 2022, up from 53 funds in the last quarter. Zach Schreiber’s Point State Capital is the leading position holder in the company, with 4.2 million shares worth about $130 million.
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