In this article, we discuss the 5 undervalued energy stocks to buy according to hedge funds. In order to read our detailed analysis of the energy sector, go directly to 10 Undervalued Energy Stocks to Buy According to Hedge Funds.
5. EOG Resources, Inc. (NYSE:EOG)
Number of Hedge Fund Holders: 51
PE Ratio (as of March 7): 15.04
EOG Resources, Inc. (NYSE:EOG) features next on our list of 10 undervalued stocks to buy according to hedge funds. From all the hedge funds tracked by Insider Monkey in the fourth quarter of 2021, 51 held stakes in EOG Resources, Inc. (NYSE:EOG) with a combined value of $1.16 billion. This is up from 47 hedge funds in the third quarter, with aggregate stakes worth $1.02 billion.
Based in Texas, EOG Resources, Inc. (NYSE:EOG) deals in the exploration, production, and marketing of crude oil, and has operations in New Mexico and Texas, as well as the Republic of Trinidad and Tobago. By the end of 2021, the firm held estimated net reserves of 3.747 billion barrels of oil equivalent. On March 7, EOG Resources, Inc. (NYSE:EOG) was given an ‘Outperform’ rating by RBC Capital analyst Scott Hanold, who also raised the firm’s price target on the firm to $140 from $125. The analyst holds that the firm is on track to reach pre-COVID oil production levels by end of this year.
EOG Resources, Inc. (NYSE:EOG) reported earnings per share of $3.09 in the fourth quarter, missing estimates by $0.08. Revenue for Q4 was $6.04 billion, beating estimates by $481.14 million, and above 103.84% from the year-ago quarter.
Artisan Partners, an investment firm, mentioned many stocks in its Q4 2021 investor letter, and EOG Resources, Inc. (NYSE:EOG) was one of them. The fund said:
“EOG Resources, a US shale-focused E&P firm, has been a beneficiary of higher energy prices. The business enjoys a low-cost production position and a strong balance sheet which enabled the company to increase production capabilities during the downturn. As energy prices recover and the industry adjusts to the new supply and demand dynamics, investors have begun to appreciate the earnings power of the business. EOG’s management focuses on return on invested capital and cash flow generation, which distinguishes it from most of the company’s competitors. We believe EOG’s high-quality management team and access to low-cost reserves are sustainable competitive advantages in a commodity industry.”
4. Devon Energy Corporation (NYSE:DVN)
Number of Hedge Fund Holders: 51
PE Ratio (as of March 7): 14.29
Devon Energy Corporation (NYSE:DVN) is an energy company that engages in the exploration and marketing of oil, natural gas, and natural gas liquids in the United States. 51 hedge funds were bullish on the firm’s shares in the fourth quarter, as compared to 48 in the preceding quarter. With 14.5 million shares worth $638.96 million, GQG Partners was the top shareholder in Devon Energy Corporation (NYSE:DVN) in Q4 2021. This represented a 5% increase in holding from the previous quarter.
On February 22, Raymond James analyst John Freeman maintained a ‘Strong Buy’ rating on Devon Energy Corporation (NYSE:DVN), whilst increasing the price target to $70 from $65. Freeman sees the firm well-positioned moving forward, with its shareholder-friendly dividend payout structure, strong balance sheet, and a deep drilling inventory all providing positive indicators.
As of March 7, Devon Energy Corporation (NYSE:DVN) gained 144.72% in the last year, and 112.33% in the last 6 months. The firm’s revenue for Q4 beat estimates by $1.04 billion, coming in at $4.27 billion. EPS was recorded at $1.39, outperforming estimates by $0.15.
Investment firm GoodHaven Capital Management talked about Devon Energy Corporation (NYSE:DVN) in its investor letter for Q4 2020, stating:
“After a rough start to the year our two biggest energy holdings – WPX Energy rebounded materially in the last six months though energy was still our biggest detractor for the year. I’ve previously written about deciding earlier this year to direct new capital towards better businesses versus adding more to the energy sector, but given the material optionality at WPX, we opted to maintain a material exposure. Recently WPX announced an all stock merger with a larger competitor – Devon Energy – which will leave the new company with plenty of cash flow at lower oil prices, less leverage, and material upside to higher commodity prices.”
3. Chevron Corporation (NYSE:CVX)
Number of Hedge Fund Holders: 53
PE Ratio (as of March 7): 19.91
Chevron Corporation (NYSE:CVX) was seen in the portfolio of 53 hedge funds in the fourth quarter, which held combined shares worth $6.5 billion in the firm. This shows improving hedge fund sentiment from last quarter, where 51 hedge funds were bullish on Chevron Corporation (NYSE:CVX) shares.
Operating as an energy company worldwide, Chevron Corporation (NYSE:CVX) explores and produces crude oil, natural gas, and other commodities, and also conducts refinery operations to turn crude oil into petrochemicals and lubricants.
On March 2, BMO Capital analyst Phillip Jungwirth maintained an ‘Outperform’ rating on Chevron Corporation (NYSE:CVX) shares and raised the price target to $170 from $140. The analyst sees the firm’s higher exposure to oil and greater upstream weighting versus integrated peers as positive indicators. He pointed out that the firm’s Analyst Day highlighted its progress and commitment to higher returns for shareholders, as well as its lower carbon strategy.
Revenue for the fourth quarter came in at $48.13 billion for Chevron Corporation (NYSE:CVX), which exceeded estimates by $2.83 billion and was up 90.64% in comparison to the year-ago quarter.
Berkshire Hathaway of billionaire Warren Buffett was the top shareholder in Chevron Corporation (NYSE:CVX) at the close of the fourth quarter, with 38.24 million shares valued at $4.48 billion. Buffett increased his holding in the energy firm by 34% over the previous quarter.
2. ConocoPhillips (NYSE:COP)
Number of Hedge Fund Holders: 56
PE Ratio (as of March 7): 16.68
ConocoPhillips (NYSE:COP) is an energy company based in Houston, Texas. It deals in the production and sale of crude oil, bitumen, natural gas, liquefied natural gas (LNG), and natural gas liquids around the globe. 56 hedge funds were bullish on the firm’s shares in the fourth quarter, with aggregate stakes worth $1.55 billion. This is up from 49 hedge funds in the previous quarter holding positions worth $1.37 billion in ConocoPhillips (NYSE:COP).
On March 7, RBC Capital analyst Scott Hanold maintained an ‘Outperform’ rating on ConocoPhillips (NYSE:COP) shares, noting that the firm may be able to generate around $19 billion of free cash flow in 2022, of which a large portion should be returned to investors. He upped his firm’s price target on ConocoPhillips (NYSE:COP) to $120 from $110.
Reporting its Q4 earnings on February 3, ConocoPhillips (NYSE:COP) posted an EPS of $2.27, exceeding analysts’ estimates by $0.08. The firm’s revenue of $15.96 billion was up 163.89% year-on-year and beat analysts’ forecasts by $2.56 billion.
ClearBridge Investments, an investment firm, published its “Large Cap Value Strategy” Q3 2021 investor letter, where it talked about the prospects of ConocoPhillips (NYSE:COP). The fund said:
“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.”
1. Exxon Mobil Corporation (NYSE:XOM)
Number of Hedge Fund Holders: 71
PE Ratio (as of March 7): 16.17
Exxon Mobil Corporation (NYSE:XOM) was the most popular undervalued energy stock to buy according to hedge funds according to our database, where 71 hedge funds held stakes worth $5.38 billion in the firm. This shows a positive trend from last quarter, where 64 hedge funds held combined positions worth $4.64 billion in Exxon Mobil Corporation (NYSE:XOM).
Based in Texas and founded in 1870, Exxon Mobil Corporation (NYSE:XOM) is an oil company with operations around the globe. On March 7, MKM Partners analyst John Gerdes reiterated a ‘Buy’ rating on the firm’s shares, citing a strong production outlook. Gerdes upped his firm’s price target on Exxon Mobil Corporation (NYSE:XOM) to $84 from $81 and holds that the energy company could generate around $40.2 billion of free cash flows in 2022, assuming approximately $21.6 billion in net capital expenditures for the year.
In the fourth quarter, Exxon Mobil Corporation (NYSE:XOM) recorded earnings per share of $2.05, which outperformed estimates by $0.11. Quarterly revenue of $84.97 billion was above analysts’ forecasts by $6.24 billion and signaled an increase of 82.56% year-on-year. As of March 7, shares of Exxon Mobil Corporation (NYSE:XOM) have surged 42.98% in the last 12 months, and 59.71% in the last 6 months.
Investment firm Goehring & Rozencwajg Associates talked about Exxon Mobil Corporation (NYSE:XOM) in its Q3 2021 investor letter. The fund said:
“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.”
You can also take a look at 10 Best Value Stocks To Buy Now and 10 Best Biotech Stocks To Invest In.
