In this article, we will look at 5 energy stocks to buy now according to Till Bechtolsheimer’s Arosa Capital. You can see our detailed analysis of these stocks, Arosa Capital Management’s investment philosophy, and go to 10 Energy Stocks to Buy Now According to Till Bechtolsheimer’s Arosa Capital.
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 (NYSE:MRO) 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 (NYSE:MRO) 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 (NYSE:MRO) 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. (NYSE:LFG) 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. (NYSE:LFG) 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 (NYSE:CVX) 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 (NYSE:CVX) also confirmed on March 1, 2022, that the company will be acquiring Renewable Energy Group, Inc. (NASDAQ:REGI) 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 (NYSE:CVX) 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 (NYSE:CVX) 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 (NYSE:CVX) 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 (NYSE:COP) 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 (NYSE:COP) 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 (NYSE:COP) to $115 from $98 and maintained a Buy rating on the shares.
Arosa Capital’s stake in ConocoPhillips (NYSE:COP) 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 (NYSE:COP) 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 (NYSE:COP) 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.
