In this article, we discuss the 5 most undervalued oil stocks to buy according to hedge funds. To go through our detailed analysis of the oil and gas sector, go directly to the 10 Most Undervalued Oil Stocks To Buy According To Hedge Funds.
5. Devon Energy Corporation (NYSE:DVN)
Number of Hedge Fund Holders: 52
P/E Ratio as of December 5: 7.62
Devon Energy Corporation (NYSE:DVN) primarily engages in hydrocarbon exploration in the United States, registered in Delaware, and headquartered at the Devon Energy Center, a 50-story skyscraper in Oklahoma City, Oklahoma. In the second quarter, the company generated over $1.4 billion in operating cash flow and allocated $690 million to shareholders through dividends and stock buybacks.
On November 27, Stifel decreased the price target on Devon Energy Corporation (NYSE:DVN)’s stock to $77 from $79 and maintained a Buy rating on the shares.
Among the 910 hedge funds monitored by Insider Monkey, 52 of them held stakes in Devon Energy Corporation (NYSE: DVN). The largest stake in Devon Energy Corporation (NYSE:DVN) was held by Donald Yacktman’s Yacktman Asset Management, which possesses a $145.2 million stake in the company.
4. ConocoPhillips (NYSE:COP)
Number of Hedge Fund Holders: 62
P/E Ratio as of December 5: 12.53
Houston-based ConocoPhillips (NYSE:COP) is an independent exploration and production (E&P) company involved in the global exploration, production, transportation, and marketing of crude oil, bitumen, natural gas, natural gas liquids, and liquefied natural gas.
In a successful move earlier this October, ConocoPhillips (NYSE:COP) completed the acquisition of the remaining 50% stake in the Surmont oil sands project from TotalEnergies EP Canada Ltd. The deal, valued at approximately $2.7 billion in cash (equivalent to CAD 3.7 billion), also includes potential future contingent payments of around $0.3 billion (equivalent to CAD 0.4 billion). This transaction grants ConocoPhillips (NYSE:COP) full ownership, holding a 100% stake in Surmont, and maintains its position as the project’s operator.
As of the third quarter of 2023, a total of 62 hedge funds, tracked by Insider Monkey, had stakes in ConocoPhillips (NYSE:COP). The largest stakeholder, with a $1.5 billion investment in the company, was Natixis Global Asset Management’s Harris Associates.
Oakmark Select Fund made the following comment about ConocoPhillips (NYSE:COP) in its second quarter 2023 investor letter:
“ConocoPhillips (NYSE:COP) is one of the largest and most efficient exploration and production companies in the country. The company has an extensive resource base of high-quality drilling inventory in the U.S. and various international locations as well as a growing liquified natural gas business. In our view, the depth and quality of ConocoPhillips’s inventory is a competitive differentiator that is not fully captured in today’s share price. Over the next 10 years, we believe ConocoPhillips will be able to return more than 100% of its current market cap to shareholders via dividends and share repurchases while growing its production at a mid-single-digit annual pace. We believe ConocoPhillips is also among the best managed companies in the oil and gas industry and we are impressed by its history of accretive capital allocation under CEO Ryan Lance. The stock has meaningfully underperformed the broader market year-to-date and is an attractive addition to our portfolio.”
3. Chevron Corporation (NYSE:CVX)
Number of Hedge Fund Holders: 72
P/E Ratio as of December 5: 10.70
Chevron Corporation (NYSE:CVX) is a prominent American multinational energy company primarily focused on the oil and gas industry. Originally established as the Standard Oil Company of California and emerging as the second-largest direct descendant of Standard Oil, Chevron has its headquarters in San Ramon, California, and operates across over 180 countries worldwide.
On October 23, Chevron Corporation (NYSE:CVX) announced a definitive agreement with Hess Corporation for an all-stock transaction valued at $53 billion. Under this agreement, Chevron will acquire all outstanding shares of Hess. The acquisition is expected to enhance and broaden Chevron’s portfolio, with a particular emphasis on the Stabroek block in Guyana, described as an “exceptional” asset offering industry-leading cash margins and a low carbon footprint, promising continued production growth into the next decade.
By the end of this year’s third quarter, 72 out of the 910 hedge funds part of Insider Monkey’s database had held a stake in Chevron Corporation (NYSE:CVX). Out of these, the firm’s biggest investor is Warren Buffett’s Berkshire Hathaway since it owns 110.24 million shares that are worth $18.59 billion.
The London Company Large Cap Strategy made the following comment about Chevron Corporation (NYSE:CVX) in its first quarter 2023 investor letter:
“Initiated: Chevron Corporation (NYSE:CVX) – CVX is an integrated energy and chemical producer. Its upstream segment explores for, produces, processes and transfers energy products. Its downstream segment refines and markets these products in addition to industrial plastics and fuel and lubricant additives. Among the major oil companies, CVX is the most levered to oil and gas production; it has one of the most successful exploration programs and among the best production profiles. CVX also has less exposure to the downstream business, which provides an above-peer operating margin profile and supports CVX’s return on invested capital. CVX has one of the strongest balance sheets in the oil industry with net debt/EBITDA of just 0.1x. The combination of its low cost positioning and strong balance sheet gives us greater confidence in downside protection despite its ties to a volatile commodity. We’re attracted to management’s rational approach to capital allocation, with consideration for the full cycle. In terms of capital allocation, CVX just announced a $75B share repurchase plan, and it pays a healthy 3.5% dividend. We have owned CVX in the past and it is the only Energy exposure in the Large Cap portfolio.”
2. Occidental Petroleum Corporation (NYSE:OXY)
Number of Hedge Fund Holders: 75
P/E Ratio as of December 5: 12.63
Occidental Petroleum Corporation (NYSE:OXY) is an American company specializing in hydrocarbon exploration within the United States and the Middle East. Additionally, the company engages in petrochemical manufacturing activities across various locations, including the United States, Canada, and Chile. Organized in Delaware, Occidental Petroleum Corporation (NYSE:OXY) has its headquarters situated in Houston.
Occidental Petroleum Corporation (NYSE:OXY) is reportedly in negotiations to acquire shale driller CrownRock LP, according to the Wall Street Journal. This move is part of the ongoing consolidation trend in North America’s most prolific oil field. The potential deal for CrownRock is anticipated to have a value exceeding $10 billion, including debt, and might materialize in the near future, as per sources familiar with the matter cited by the newspaper.
A total of 75 hedge funds out of the 910 hedge funds tracked by Insider Monkey had stakes in Occidental Petroleum. The biggest stakeholder of the company was Warren Buffett’s Berkshire Hathaway which had a $13.2 billion stake in the company.
1. Exxon Mobil Corporation (NYSE:XOM)
Number of Hedge Fund Holders: 79
P/E Ratio as of December 5: 10.08
Exxon Mobil Corporation (NYSE:XOM), a prominent American energy company, is a top pick for investment during bear markets. With a lineage tracing back to John D. Rockefeller’s Standard Oil, Exxon Mobil Corporation (NYSE:XOM) has undergone a remarkable transformation spanning 140 years. Originating as a local kerosene distributor in the United States, it has grown into a global giant, ranking among the foremost publicly traded entities in the petroleum and petrochemical sectors. Over the past five years, Exxon Mobil Corporation (NYSE:XOM) has experienced significant growth of around 30%, consistently increasing dividends for an impressive 39-year streak.
On October 11, Exxon Mobil Corporation (NYSE:XOM) and Pioneer Natural Resources (NYSE:PXD) jointly unveiled a firm agreement detailing Exxon Mobil Corporation (NYSE:XOM)’s acquisition of Pioneer. This merger is structured as an all-stock transaction with a total valuation of $59.5 billion, equivalent to $253 per share based on ExxonMobil’s closing price on October 5, 2023. As per the agreement’s stipulations, Pioneer shareholders will receive 2.3234 shares of XOM for each PXD share upon completion. The overall enterprise value of this transaction, accounting for net debt, approximates $64.5 billion.
By the end of Q3 2023, data from Insider Monkey’s database revealed that 79 hedge funds had positions in Exxon Mobil Corporation (NYSE:XOM), an decrease from the 71 hedge funds in the previous quarter. The combined value of these holdings exceeds $4.48 billion.
You can also take a look at Citadel Stock Holdings: 12 Biggest Energy Stocks and 23 Richest Countries in Asia by GDP Per Capita in 2023.
