In this article, we will look at 10 energy stocks to buy now according to Till Bechtolsheimer’s Arosa Capital.
Mr. Till Bechtolsheimer graduated with a bachelor’s degree in Economics and Philosophy from the University of Dublin in 2005, after which he joined UBS wealth management where he served as the associate director in private equity and hedge fund teams. In 2007, Mr. Bechtolsheimer joined UBS O’ Connor where he was the portfolio manager for O’ Connor’s investments in the energy sector. After a period of about six and a half years, Till Bechtolsheimer co-founded his hedge fund, Arosa Capital Management, in 2013. Building on his experience from O’ Connor, Mr. Bechtolsheimer focused on populating Arosa Capital’s portfolio by mostly oil and gas companies.
The building block of Arosa Capital Management’s investment strategy is extensive research and analysis of the oil and gas market. These analyses help the fund in identifying changing market trends, measuring market volatility, and then narrowing down investment opportunities with the goal of maximizing risk-adjusted positive returns. As of the fourth quarter of 2021, Mr. Bechtolsheimer manages over $405.3 million in 13F securities through his hedge fund, Arosa Capital Management.
Arosa Capital Management’s investment portfolio is dominated by the energy sector. As of the fourth quarter of 2021, Arosa Capital’s top hedge fund holdings included Chevron Corporation (NYSE:CVX), ConocoPhillips (NYSE:COP), and Shell plc (NYSE:SHEL).
Photo by David Thielen on Unsplash
Our Methodology
To compile this list of 10 energy stocks to buy now according to Till Bechtolsheimer’s Arosa Capital we went through the hedge fund’s 13F portfolio as of the end of the fourth quarter of 2021. We narrowed down our selection to stocks that were among Arosa Capital’s top holdings. Further, we included the hedge fund sentiment and analyst ratings for these stocks, which we believe to be important metrics when it comes to investment decisions.
10 Energy Stocks to Buy Now According to Till Bechtolsheimer’s Arosa Capital
10. Ovintiv Inc. (NYSE:OVV)
Stake Value of Arosa Capital Management: $7,358,000
Percentage of Arosa Capital Management’s 13F Portfolio: 1.81%
Number of Hedge Fund Holders: 44
As of the fourth quarter of 2021, Ovintiv Inc. (NYSE:OVV) was a part of 44 hedge fund portfolios. The total stakes of these hedge funds were $1.07 billion, up from $684.07 million in the previous quarter. The fund’s stake in Ovintiv Inc. is in excess of $7.35 million, which covers 1.81% of their investment portfolio. On February 28, 2022, Truist analyst Neal Dingman raised his price target on Ovintiv Inc. from $53 to $58.
On February 24, 2022, the board of directors of Ovintiv Inc. declared a quarterly dividend of $0.20 per share of common stock payable on March 31, 2022, to shareholders of record as of March 15, 2022. Moreover, the company put forth its earnings for the fiscal fourth quarter of 2021 on the same day. Ovintiv Inc. reported an EPS of $1.25 for the quarter and generated revenues amounting to $3.34 billion, up 118.52% year over year, beating revenue estimates by $1.41 billion.
Miller Value Partners published their fourth-quarter 2021 investor letter in which they shared their thoughts about Ovintiv Inc.. Here’s what they had to say:
“The outlook for high multiple favorites depends to a great degree on interest rates. Warren Buffett likened interest rates to the force of gravity for asset prices. At current low levels, high valuations on long-duration assets can be justified. If interest rates move up, the adjustment will be painful. Market action early in the new year, with the swift moves up in interest rates and down in the Nasdaq, offers a taste of the medicine.
We underwrite all our names to have sufficient upside even if risk-free rates move up to 3% (a scenario, not a forecast!). As we evaluate the opportunity set, we find more attractive prospects in the classic value names. We often hear that people think value investing is dead, which only strengthens our conviction. Our gross exposure to classic value has risen from 44% a year ago to 62% currently.
One new name that illustrates the potential we see is Ovintiv (OVV), an oil and gas producer. We’ve seen a huge shift in the industry away from growth towards returns on capital, cash generation, and capacity discipline. OVV exemplifies the change.
OVV’s new CEO Brendan McCracken says: “We are at the forefront of driving innovation to produce oil and gas from shale both profitably and sustainably. We will generate superior returns and free cash flow by continuously improving capital efficiency and expanding margins while driving down emissions. We will deliver that value to our shareholders through disciplined capital allocation.”
Based on crude at $65 (well below the current $83.82 as of 1/14/22), the company guides to free cash flow generation of $11B over the next 5 years and $21B in the next 10 years. The company’s market cap is currently $10B and its enterprise value is $16B. It’s returning a significant portion of the capital to shareholders. If crude averages $70 in 2022, the company will return $700M to shareholders (in addition to paying down a significant amount of debt), which implies a yield of 7% at the current $39.53 price. In other words, there’s a good shot the company will return nearly its entire market cap to shareholders over the next 5 years.”
9. Renewable Energy Group, Inc. (NASDAQ:REGI)
Stake Value of Arosa Capital Management: $7,516,000
Percentage of Arosa Capital Management’s 13F Portfolio: 1.85%
Number of Hedge Fund Holders: 16
Renewable Energy Group, Inc. (NASDAQ:REGI) provides lower-carbon transportation fuels in the United States and internationally. Last November, the company reported its earnings for the fiscal third quarter of 2021 in which it beat on revenue. Renewable Energy Group, Inc. reported earnings per share of $0.83, and reported revenues of $1.01 billion, beating estimates by over $100 million.
On February 25, 2022, it was reported that Chevron Corporation is in talks to acquire Renewable Energy Group, Inc. for roughly $3 billion, at $61.50 per share. This announcement drove the company’s share price to spike by 34% in after-hours trading.
By the end of the fourth quarter of 2021, 16 hedge funds held stakes in Renewable Energy Group, Inc.. The total value of these stakes was $84.62 million, up from 15 positions in the previous quarter with stakes worth $40.43 million. Based on these numbers, the hedge fund sentiment for Renewable Energy Group, Inc. is positive.
Hazelton Capital Partners mentioned Renewable Energy Group, Inc. in their third-quarter 2021 investor letter. Here’s their take on whether Renewable Energy Group, Inc. is a good long term investment:
“Since the beginning of the year, Renewable Energy Group’s share price has declined over 35% and nearly 60% since February when Hazelton Capital Partners cut its position in half. During the 3rd quarter, Hazelton Capital Partners repurchased another tranche, returning REGI to the Fund’s largest portfolio holding with a share count greater than where the position started the year. Renewable Energy Group continues to execute well in a market where supply and demand pressures remain both dynamic and uncertain. Beneath the veneer of a company that has a track record of meeting/beating its revenue and profit guidance, lies a management team whose main focus is on its supply chain and logistic operations. REGI leverages its competitive edge at both procuring cheap feedstocks and delivering its refined biodiesel & renewable diesel to the highest value markets while growing downstream opportunities. The company recently announced partnerships with both GoodFuels, which supplies biofuels to the marine industry and Canadian National Railway. Both companies are looking to expand biodiesel into their fuel mix to reduce their greenhouse gas emissions.
In October of 2021, Renewable Energy Group broke ground on its 250 million gallon/year (mmgy) renewable diesel refinery expansion at its Geismar, Louisiana refinery. The $950 million project is expected to come online by 2023, achieving a full run rate by 2024. With debt of $550 million and a net cash position of roughly $500 million, REGI’s balance sheet is prepared for the upcoming expansion. About 80% of the long lead items have been procured, and their prices locked in. The construction costs will be spread out over the upcoming years, with 15% of the total construction costs hitting in 2021, 45% in 2022, and the remainder in 2023. The nameplate capacity of the new refinery is 250mmgy but given that all of REGI’s refineries have an effective capacity that exceeds their nameplate, one can expect that Geismar will
be producing over 400mmgy (Geismar ist refinery effective capacity should benefit from site improvements as well). That will greatly change Renewable Energy Group’s renewable diesel mix from 17% to 46% of total production and have a meaningful impact on the company’s future margins and cash flows.”
8. Baker Hughes Company (NASDAQ:BKR)
Stake Value of Arosa Capital Management: $8,045,000
Percentage of Arosa Capital Management’s 13F Portfolio: 1.98%
Number of Hedge Fund Holders: 35
This January Barclays analyst J. David Anderson raised his price target on Baker Hughes Company (NASDAQ:BKR) to $31 from $30 and reiterated an Overweight rating on the shares. As of the fourth quarter of 2021, Arosa Capital Management’s stake in the company stands at $8.04 million. The investment covers 1.98% of the hedge fund’s 13F portfolio.
As of March 1, 2022, Baker Hughes Company has a forward dividend yield of 2.44%. The company announced earnings for the fiscal fourth quarter of 2021 on January 20, 2022, in which the company beat on both EPS and revenue. According to their report, the company’s revenue for the quarter was in excess of $5.52 billion, and the company’s earnings per share for the quarter were $0.32.
Baker Hughes Company was spotted on 35 hedge fund portfolios by the end of the fourth quarter of 2021. These 35 funds’ stakes in the company were more than $747.83 million.
Here’s what Madison Funds had to say about Baker Hughes Company in its third-quarter 2021 investor letter:
“BKR is a leading oilfield services provider that helps its customers with oil and gas exploration and production. Its customers include companies that discover oil, energy data management firms, drilling companies, well construction, and production and completion firms. The firm is also synonymous with the U.S. rig count. BKR also helps make energy cleaner and more efficient, and is a leader in energy transition businesses, including carbon capture and hydrogen, along with being a market leader in supplying equipment for liquified natural gas (LNG) projects….”
7. EQT Corporation (NYSE:EQT)
Stake Value of Arosa Capital Management: $8,070,000
Percentage of Arosa Capital Management’s 13F Portfolio: 1.99%
Number of Hedge Fund Holders: 46
EQT Corporation (NYSE:EQT) is an American energy company engaged in hydrocarbon exploration and pipeline transport. It was one of the latest additions to Arosa Capital Management’s 13F portfolio in the fourth quarter of 2021. The hedge fund’s stake in the energy company is $8.07 million, which accounts for 1.99% of the fund’s investment portfolio.
This February, EQT Corporation announced fiscal fourth-quarter 2021 earnings in which the company’s profit surged, beating on revenue. EQT Corporation reported revenues of $3.84 billion, up 206.54% year over year, and beat revenue estimates by $2.35 billion. The company reported earnings per share of $0.41.
By the end of the fourth quarter of 2021, 46 hedge funds held stakes in EQT Corporation which were worth over $1.21 billion. This is compared to 57 positions in the prior quarter, with a total stake of $838.22 million.
6. Diamondback Energy, Inc. (NASDAQ:FANG)
Stake Value of Arosa Capital Management: $8,178,000
Percentage of Arosa Capital Management’s 13F Portfolio: 2.01%
Number of Hedge Fund Holders: 45
On February 24, 2022, RBC Capital analyst Scott Hanold raised his price target on Diamondback Energy, Inc. (NASDAQ:FANG) to $160 from $150 and reiterated an Outperform rating on the shares. According to the fourth quarter 2021 filings, the fund’s stake in Diamondback Energy, Inc. is in excess of $8.17 million.
On February 22, 2022, Diamondback Energy, Inc. declared a quarterly cash dividend of $0.60 per share, which is a 20% increase from the prior dividend of $0.50. The stock’s forward yield at the time was 1.87%. The dividend is payable on March 11, for shareholders of record March 4, 2022.
Diamondback Energy, Inc. reported revenues of $2.02 billion for the fiscal fourth quarter of 2021, up 162.94% year over year from $769 million. The company announced its earnings on February 22, 2022. Diamondback Energy, Inc. also reported earnings per share of $3.63, beating EPS estimates by $0.27.
Insider Monkey was able to identify 45 hedge funds that held stakes in Diamondback Energy, Inc. by the end of the fourth quarter of 2021. The total value of these stakes exceeded $572.4 million.
Here’s what Miller Value Partners said about Diamondback Energy, Inc. in its fourth-quarter 2021 investor letter:
“Diamondback Energy (FANG) returned 14.4% in the quarter as oil price rose and fell during the quarter ending the period largely in the same place that it started. The company reported strong 3Q results beating on the top and bottom line. The company reported revenue of $1.9B beating consensus of $1.5B with EPS of $2.94 beating expectations for $2.79. The beat was driven by a combination of higher volumes, higher realizations, and efficiency gains. The company increased its total production guidance for the year to 370-372mboe/d1 (up from 363-370mboe/d) while lowering Capital Expenditure (CAPEX) guidance for the second time this year to $1.49-1.53B. The company raised the dividend for the third time this year to $2/share annually while authorizing a new $2B share repurchase program. Starting in 4Q21, the company plans to return 50% of Free Cash Flow to shareholders through the base dividend and a combination of buybacks and special dividends. Finally, the CEO Travis Stice announced plans to reduce methane emissions by 70% as part of the firm’s ESG initiative.”
5. Shell plc (NYSE:SHEL)
Stake Value of Arosa Capital Management: $9,842,000
Percentage of Arosa Capital Management’s 13F Portfolio: 2.42%
Number of Hedge Fund Holders: 41
Shell plc (NYSE:SHEL) operates as an energy and petrochemical company worldwide. The company was formerly known as Royal Dutch Shell plc (NYSE:RDS) and changed its name to Shell plc (NYSE:SHEL) in January 2022. Arosa Capital Management upped its stake by 75% in the company, from $5.79 million in the third quarter of 2021 to $9.84 million in the fourth quarter of 2021. The investment covers 2.42% of the fund’s 13F portfolio and the stock is ranked at number 11 among the fund’s holdings.
On February 4, 2022, Cowen analyst Jason Gabelman raised his price target on Shell plc (NYSE:SHEL) to $58 from $53 and reiterated an Outperform rating on the shares.
On February 3, 2022, Shell plc (NYSE:SHEL) announced its revenue and earnings per share for the fourth quarter of 2021, beating on both. The company’s revenue was reported to be $85.28 billion, up 93.87% year over year, beating revenue estimates by $26.62 billion. Shell plc (NYSE:SHEL) reported an EPS of $1.66, beating expert estimates by $0.41. The company also announced that its board of directors declared a quarterly cash dividend of $0.24 per share. The stock’s forward yield at the time was 3.61%, and as of March 1, 2022, the yield is 3.66%.
There were 41 hedge funds that held stakes in Shell plc (NYSE:SHEL) by the end of the fourth quarter of 2021. The total value of these stakes crossed $2.63 billion, up from 33 positions in the third quarter of 2021 with stakes of $2.05 billion.
Here is what Goehring & Rozencwajg Associates had to say about Shell plc (NYSE:SHEL) in their third-quarter 2021 investor letter:
“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 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.”
4. Marathon Oil Corporation (NYSE:MRO)
Stake Value of Arosa Capital Management: $9,945,000
Percentage of Arosa Capital Management’s 13F Portfolio: 2.45%
Number of Hedge Fund Holders: 40
On February 23, 2022, Piper Sandler analyst Mark Lear raised his price target on Marathon Oil Corporation (NYSE:MRO) to $27, up from $22. The analyst also upgraded the stock to Overweight from Neutral.
This February, Marathon Oil Corporation reported earnings for the fiscal fourth quarter of 2021. The company generated a revenue of $1.80 billion, up from $830 million in the fiscal fourth quarter of 2020. This is a 116.87% increase year over year. Marathon Oil Corporation beat on EPS by $0.21, reporting earnings per share of $0.77 for the quarter.
By the end of the fourth quarter of 2021, 40 hedge funds held stakes in Marathon Oil Corporation worth $969.1 million. Of these, 40 funds, Arosa Capital’s stake in the company was $9.94 million, which accounted for 2.45% of the fund’s investment portfolio, placing the stock among the top 10 holdings by stake value. This is compared to 40 positions in the third quarter of 2021, with a total stake of $903.22 million.
3. Archaea Energy Inc. (NYSE:LFG)
Stake Value of Arosa Capital Management: $10,054,000
Percentage of Arosa Capital Management’s 13F Portfolio: 2.48%
Number of Hedge Fund Holders: 26
Archaea Energy (NYSE:LFG) is one of the largest renewable natural gas producers in the United States. Arosa Capital Management upped its initial stake in Archaea Energy Inc. from $1.42 million in the third quarter of 2021, to $10.05 million in the fourth quarter of 2021. This is an increase of 634%, making the stock rank among the top 10 holdings of the fund. The investment covers 2.48% of Arosa Capital’s 13F portfolio.
By the end of the fourth quarter of 2021, Insider Monkey spotted Archaea Energy Inc. on 26 investment portfolios. The total stakes of these funds in the company were $361.44 million, up from $317.76 million in the third quarter of 2021, with 25 positions. Based on these numbers, it can be observed that the hedge fund sentiment for the stock is positive.
2. Chevron Corporation (NYSE:CVX)
Stake Value of Arosa Capital Management: $11,002,000
Percentage of Arosa Capital Management’s 13F Portfolio: 2.71%
Number of Hedge Fund Holders: 53
This March, Chevron Corporation topped the Dow Jones index and hit a new 52-week high after raising its stock buyback program to $5 billion to $10 billion annually, up from the company’s previous plans for $3 billion to $5 billion of annual repurchases. Chevron Corporation also confirmed on March 1, 2022, that the company will be acquiring Renewable Energy Group, Inc. for an all-cash transaction of $3.15 billion, at $61.50 per share.
On February 23, 2022, Cowen analyst Jason Gabelman raised his price target on Chevron Corporation to $140 from $133 and reiterated an Outperform rating on the shares.
Out of the 924 elite hedge funds being tracked by Insider Monkey, 53 held stakes in Chevron Corporation by the end of the fourth quarter of 2022. The total value of these stakes was in excess of $6.50 billion. This is compared to 51 positions in the prior quarter, with a total stake of $4.44 billion. The hedge fund sentiment for the stock is therefore positive.
Goehring & Rozencwajg Associates published its “Natural Resource Market Commentary” third-quarter 2021 investor letter. The firm shared its thoughts on Chevron Corporation in its third-quarter 2021 commentary. Here’s what they had to say:
“After successfully replacing 25% of Exxon’s board of directors despite owning just 0.02% of the outstanding equity, Engine No. 1, the climate-focused activist hedge fund, met with Chevron’s management late last summer. In discussions that were later described as “cordial,” Chevron executives shared their plan to reduce carbon emissions. Subsequently, Chevron announced new plans to further reduce carbon output, along with their intention to appoint a new director with “environmental expertise.” Although it remains unclear exactly what Engine No. 1 is planning, rumors suggest the fund has contacted other investors, strongly suggesting they intend to launch a second campaign in the not-too-distant future.
What should Chevron expect?
It was recently reported by The Wall Street Journal that Exxon was considering abandoning two massive natural gas projects: the 75 trillion cubic foot (tcf ) Rovuma LNG project (capital cost $30 bn) and the 5 tcf Ca Voi Xanh offshore-Vietnam gas project (capital cost $10 bn). Exxon board members (most likely including the three supported by Engine No. 1) have publically expressed concerns about both projects. According to internal reports, these projects are among the highest CO2 producers in Exxon’s pipeline; it is no surprise these projects have been called into question. However, we find the plight of both fields to be perplexing since production would almost certainly be used to displace coal in electricity generation, cutting CO2 emissions by nearly 50%. This fact seems to be lost on the new Exxon board members.”
1. ConocoPhillips (NYSE:COP)
Stake Value of Arosa Capital Management: $14,436,000
Percentage of Arosa Capital Management’s 13F Portfolio: 3.56%
Number of Hedge Fund Holders: 56
This February, ConocoPhillips announced its earnings for the fiscal fourth quarter of 2021, in which the company beat on both EPS and revenue. The company’s revenue grew by 163.89% year over year from $6.05 billion in the fiscal fourth quarter of 2020, to $15.96 billion in the fiscal fourth quarter of 2021. The company beat revenue estimates by $2.56 billion. ConocoPhillips reported earnings per share of $2.27, beating EPS estimates by $0.08. The stock has a forward dividend yield of 2.02%.
On February 11, 2022, Mizuho analyst Vincent Lovaglio raised his price target on ConocoPhillips to $115 from $98 and maintained a Buy rating on the shares.
Arosa Capital’s stake in ConocoPhillips at the end of the fourth quarter of 2021 was valued at $14.43 million, which made up for 3.56% of the fund’s investment portfolio. Other than Arosa Capital Management, there were 55 hedge funds that held stakes in the company by the end of the fourth quarter of 2021. The total stake value of these 56 hedge funds in ConocoPhillips was in excess of $1.55 billion. This is compared to 49 positions in the third quarter of 2021, with a total stake of $1.37 billion.
ClearBridge Investments mentioned ConocoPhillips in its third-quarter 2021 investor letter. Here’s what the firm had to say:
“We also seized the opportunity to add to our position in energy producer ConocoPhillips at what we considered an attractive valuation. The market rewarded this move late in the quarter after ConocoPhillips announced its purchase of Permian Basin assets from Shell, making the company the second-largest oil and gas producer in the contiguous U.S. We view this as a positive strategic transaction for a well-run, ESG-cognizant oil producer. With this and prior transactions, the company continues to press its cost advantage and is well-positioned to benefit from ongoing energy demand recovery to pre-pandemic levels.”
You can also take a look at 10 Best Dividend Stocks for Long Term and 10 Best Oil Stocks to Buy Amid Post-COVID Demand Boom and Price Volatility.
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