In this article, we discuss 5 fossil fuel stocks to invest in for the future. If you want to see more stocks in this list and a detailed overview of Aramco’s latest warning, check out “Chain of Sandcastles”: Aramco’s Reality Check and 10 Fossil Fuel Stocks to Invest In for Future.
5. Kinder Morgan, Inc. (NYSE:KMI)
Number of Hedge Fund Holders: 41
Kinder Morgan, Inc. (NYSE:KMI) is a Texas-based energy infrastructure company, operating through Natural Gas Pipelines, Products Pipelines, Terminals, and CO2 segments. Kinder Morgan, Inc. (NYSE:KMI) announced on August 11 that it acquired North American Natural Resources and its seven landfill gas-to-power facilities in Michigan and Kentucky for $135 million. The facilities are likely to be in service by early 2024, and they can potentially generate approximately 2 billion cf/year of RNG. Kinder Morgan, Inc. (NYSE:KMI) is one of the fossil fuel stocks to buy for the future.
Goldman Sachs analyst Michael Lapides on September 7 upgraded Kinder Morgan, Inc. (NYSE:KMI) to Neutral from Sell with a $19 price target. The analyst noted the upgrade was due to a mix of valuation, likely consensus EBITDA upside, and positive catalysts. He believes Kinder Morgan, Inc. (NYSE:KMI) is well positioned to take advantage from incremental natural gas pipeline growth and sees upside for its CO2 segment.
William B. Gray’s Orbis Investment Management is the largest position holder in Kinder Morgan, Inc. (NYSE:KMI), with 21.6 million shares worth $363.2 million. Overall, 41 hedge funds were bullish on Kinder Morgan, Inc. (NYSE:KMI) at the end of June 2022, compared to 40 funds in the last quarter.
4. EOG Resources, Inc. (NYSE:EOG)
Number of Hedge Fund Holders: 43
EOG Resources, Inc. (NYSE:EOG) was incorporated in 1985 and is headquartered in Houston, Texas. The company develops, produces, and markets crude oil, natural gas, and natural gas liquids. EOG Resources, Inc. (NYSE:EOG) expects to maintain present capital expenditure levels even as production is planned to increase by roughly 4% this year and in 2023. EOG Resources, Inc. (NYSE:EOG) is a prominent fossil fuel stock to invest in for the future.
On September 19, KeyBanc analyst Tim Rezvan initiated coverage of EOG Resources, Inc. (NYSE:EOG) with an Overweight rating and a $157 price target. While he would prefer higher share repurchases and less focus on special dividends, he noted that EOG Resources, Inc. (NYSE:EOG) offers inventory quality and depth, basin and hydrocarbon diversity, and “a culture of organic exploration”.
According to Insider Monkey’s data, 43 hedge funds were bullish on EOG Resources, Inc. (NYSE:EOG) at the end of Q2 2022, compared to 49 funds in the last quarter. Harris Associates is the largest stakeholder of the company, with 7.6 million shares worth $838.3 million.
Here is what Oakmark Select Fund had to say about EOG Resources, Inc. (NYSE:EOG) in its Q1 2022 investor letter:
“EOG Resources (NYSE:EOG) (+36%), was among our top contributors in the quarter as oil prices rallied due to tight supplies, which were then exacerbated by the Russian invasion of Ukraine. Although their share prices have increased considerably, both companies still look quite undervalued even using longer term oil prices in the $65-70 dollar range. Meanwhile, if times are good over the next couple of years, we expect these companies to return significant percentages of their market caps to shareholders.”
3. Arch Resources, Inc. (NYSE:ARCH)
Number of Hedge Fund Holders: 44
Arch Resources, Inc. (NYSE:ARCH) is a Missouri-based company that extracts and sells thermal and metallurgical coal from surface and underground mines. On August 30, Arch Resources, Inc. (NYSE:ARCH) declared a $6.00 per share quarterly dividend, consisting of a fixed component of $0.25 and a variable component of $5.75. The dividend was paid to shareholders on September 15.
Riley analyst Lucas Pipes on July 29 maintained a Buy recommendation on Arch Resources, Inc. (NYSE:ARCH) but lowered the price target on the shares to $221 from $234 after the company reported Q2 adjusted EBITDA of $460 million, falling short of his estimate of $505 million. However, he told investors to take advantage of the recent weakness, noting that Arch Resources, Inc. (NYSE:ARCH) pointed to “a strong preference for buy-backs” and boosted the repurchase authorization to $500 million.
According to Insider Monkey’s database, 44 hedge funds were bullish on Arch Resources, Inc. (NYSE:ARCH) at the end of June 2022, with combined stakes worth $723 million, compared to 45 funds in the prior quarter worth over $1 billion.
Here is what Kingdom Capital Advisor specifically said about Arch Resources, Inc. (NYSE:ARCH) in its Q2 2022 investor letter:
“Arch Resources, Inc. (NYSE:ARCH): When we began following Arch, we focused on their metallurgical coal segment and viewed their thermal coal segment as a source of potential upside. However, especially since Russia’s invasion of Ukraine, energy security has surged into focus and Arch’s thermal operation now faces higher spot prices than their met sales. Arch retired most of their convertible debt during Q2, another example of their strong commitment to delivering shareholder value. Estimates for Q2 suggest Arch should earn over $20/share vs a $130 share price, and they remain committed to distributing half of their cash flow via dividends.”
2. Teck Resources Limited (NYSE:TECK)
Number of Hedge Fund Holders: 46
Teck Resources Limited (NYSE:TECK) is a Canadian natural resources company that operates in Asia, Europe, and North America. The company produces and sells steelmaking coal, in addition to copper, zinc, blended bitumen, and other minerals and precious metals. Teck Resources Limited (NYSE:TECK) is a prominent fossil fuel stock to consider for the future.
On September 21, investment advisory Deutsche Bank maintained a Buy rating on Teck Resources Limited (NYSE:TECK) but lowered the price target on the stock to $43 from $45. Analyst Abhi Agarwal issued the ratings update. On September 19, Raymond James analyst Brian MacArthur raised the price target on Teck Resources Limited (NYSE:TECK) to C$57 from C$56 and kept an Outperform rating on the shares.
According to the second quarter database of Insider Monkey, 46 hedge funds were bullish on Teck Resources Limited (NYSE:TECK), compared to 56 funds in the prior quarter. Eric W. Mandelblatt’s Soroban Capital Partners is the biggest position holder in the company, with 13.6 million shares worth over $416 million.
1. Pioneer Natural Resources Company (NYSE:PXD)
Number of Hedge Fund Holders: 56
Pioneer Natural Resources Company (NYSE:PXD) is a Texas-based independent oil and gas exploration and production company. On August 2, the company declared a base and variable quarterly dividend of $8.57 per share. The dividend was distributed to shareholders on September 16. Pioneer Natural Resources Company (NYSE:PXD) owns notable acreage in the Permian Basin, and it is one of the biggest dividend payers in the energy sector. This merits its inclusion on our list of fossil fuel stocks to buy for the future.
On September 21, Citi analyst Scott Gruber reiterated a Buy recommendation on Pioneer Natural Resources Company (NYSE:PXD) but lowered the price target on the shares to $257 from $260. While crude oil prices have dropped, the exploration and production companies have “bounced modestly, leading to material 2023 multiple expansion and yield compression”, the analyst informed investors in a research note.
According to the second quarter database of Insider Monkey, 56 hedge funds were bullish on Pioneer Natural Resources Company (NYSE:PXD), up from 54 funds in the prior quarter. Gavin M. Abrams’ Abrams Bison Investments is a leading stakeholder in the company, with 598,000 shares worth $133.40 million.
In its Q1 2022 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Pioneer Natural Resources Company (NYSE:PXD) was one of them. Here is what the fund said:
“Our underweight to the energy sector weighed on performance, as energy prices skyrocketed from inflationary pressures and the threat of reduced supply. We have a limited footprint within the sector but continue to look for companies that will generate strong, long-term returns such as Pioneer Natural Resources Company (NYSE:PXD). Pioneer is an oil and gas exploration and production company that offers a combination of a strong asset base, quality balance sheet and compelling free cash flow yield at current commodity prices. We believe Pioneer Natural Resources Company (NYSE:PXD) has strong underlying drivers that will generate attractive risk-adjusted returns beyond shorter-term fluctuations in energy prices.”
You can also take a look at 10 Monthly Dividend Stocks with Highest Yields and 12 Best Reddit Stocks To Buy.
