In this article, we will discuss billionaire Ray Dalio’s top 10 energy stock picks. If you want to explore similar stocks, you can also take a look at Billionaire Ray Dalio’s Top 5 Energy Stock Picks.
Ray Dalio is an American billionaire hedge fund manager and philanthropist. He is the founder of Bridgewater Associates, one of the world’s largest hedge funds. Dalio is also a noted economic commentator and has written extensively on finance and investing. According to Forbes, Mr. Dalio’s real-time net worth is $19.1 billion.
The “Three Big Things” And Where To Invest According To Ray Dalio
On October 12, Ray Dalio appeared in an interview on Bloomberg where he discussed the latest economic situation. According to Mr. Dalio, the U.S. economy is facing “three big things”. The first is “the amount of debt and money creation”, and according to Mr. Dalio, central banks have not printed money “to this degree” except for the period between 1930 and 1945. The second “big thing” is “the amount of internal conflict”, and Mr. Dalio noted that the U.S. has the largest internal wealth gaps since the period between 1930 and 1945. The third challenge the U.S. economy is faced with is “international conflict” and the rising competition from China. Ray Dalio also spoke about the Fed’s actions in 2022 and his view of the current situation of the U.S. economy. Mr. Dalio noted that increasing the money supply in the economy “is stimulative over the short run and depressing over the long run” since quantitative easing is followed by quantitative tightening. Mr. Dalio noted that “the Fed and the government have given an enormous amount of debt and credit and created a lurch forward, a giant lurch forward, and created a bubble. And now they are putting on the breaks.” According to Mr. Dalio, the Fed is “trying to navigate” between sustainably high inflation and a significant weakening of the economy, and this “will probably be something like the 70s”. Further, Mr. Dalio spoke about where he would park his cash amid the current economic situation. Here are some comments from Mr. Dalio:
“If I was saving, what would I want to save in? I would like to save in the things that I know I am going to need. So I would like to save in my residence, my house. I would like to save, if I could, pay forward my kid’s education, pay forward the food or the healthcare that I can, and so on. I would want to save in those things, to buy forward the things I need most fundamentally.”
This article will discuss in detail some of Ray Dalio’s top energy stock picks which include Chevron Corporation (NYSE:CVX), ConocoPhillips (NYSE:COP), and Exxon Mobil Corporation (NYSE:XOM).
Our Methodology
To determine billionaire Ray Dalio’s top 10 energy stock picks, we reviewed Bridgewater Associates’ 13F filings that were updated at the close of the third quarter of 2022. We picked the top 10 energy stocks from Ray Dalio’s Q3 2022 investment portfolio and arranged them according to Bridgewater Associates’ stake in them. Along with each stock, we have included salient features that make them viable investment options and analyst sentiment as well.
Billionaire Ray Dalio’s Top 10 Energy Stock Picks
10. Devon Energy Corporation (NYSE:DVN)
Bridgewater Associates’ Stake Value: $14,357,000
Percentage of Bridgewater Associates’ 13F Portfolio: 0.07%
Devon Energy Corporation (NYSE:DVN) is one of the largest independent oil and gas producers in the United States. As of November 11, Devon Energy Corporation (NYSE:DVN) has gained 57.56% year to date and is trading at a PE multiple of 7x. As of September 30, Bridgewater Associates’ position in the company is valued at $14.35 million and the investment covers 0.07% of Ray Dalio’s 13F portfolio.
Devon Energy Corporation (NYSE:DVN) has a strong balance sheet with a debt-to-equity ratio of 0.59. The company has a strong cash position and is profitable. According to the company’s balance sheet, Devon Energy Corporation (NYSE:DVN) has a trailing twelve-month operating margin of 43.49% and has free cash flows of $3.41 billion.
On November 1, Devon Energy Corporation (NYSE:DVN) announced earnings for the fiscal third quarter of 2022. The company reported an EPS of $2.18 and outperformed estimates by $0.05. The company generated a revenue of $5.43 billion, up 56.72% year over year, and beat Wall Street consensus by $617.85 million.
On October 18, Piper Sandler analyst Mark Lear raised his price target on Devon Energy Corporation (NYSE:DVN) to $96 from $94 and reiterated an Overweight rating on the shares.
Here is what GoodHaven Capital Management had to say about Devon Energy Corporation (NYSE:DVN) in its second-quarter 2022 investor letter:
“Our biggest dollar gainer within this period was Devon Energy Corporation (NYSE:DVN), a position which emanated from a takeover in early 2021 of our long time holding WPX Energy. We are sitting on a material (unrealized) gain from our cost and are now receiving material dividends thanks to Devon’s thoughtful fixed/variable dividend policy. Energy is now a hot sector for investors but we have had a material exposure for a long time. We remember a bit too well $40 oil, NEGATIVELY PRICED front-month oil contract, and what it’s like to own a company with leverage and negative free cash flow during such periods. Our desire to have our biggest portfolio exposures be high return, growing, reasonably predictable and moderately levered companies lead us to reduce our Devon exposure in the past. When the recent facts and circumstances for the industry changed and appeared supportive of healthy oil prices, we decided to maintain a sizable holding and more recently added to the position. At Devon’s Q1 dividend rate, which is mostly variable in nature, the shares now yield approximately 10% and our yield on our average cost is materially higher. In addition, we maintain additional energy exposure through our long-term (and successful) holding in Hess Midstream and less directly through TerraVest and Berkshire Hathaway’s energy investments.”
Some of billionaire Ray Dalio’s top energy stock picks include Chevron Corporation (NYSE:CVX), ConocoPhillips (NYSE:COP), and Exxon Mobil Corporation (NYSE:XOM).
9. Diamondback Energy, Inc. (NASDAQ:FANG)
Bridgewater Associates’ Stake Value: $14,415,000
Percentage of Bridgewater Associates’ 13F Portfolio: 0.07%
Diamondback Energy, Inc. (NASDAQ:FANG) is an oil and natural gas company with operations in the Permian Basin of West Texas. The company is one of the largest acreage holders and producers in the Permian Basin. Diamondback Energy, Inc. (NASDAQ:FANG) has a strong balance sheet, low debt levels, and a large inventory of undeveloped acreage. The company is well-positioned to benefit from the continued development of the Permian Basin, which is one of the most prolific oil-producing regions in the United States.
On November 7, Diamondback Energy, Inc. (NASDAQ:FANG) posted earnings for the fiscal third quarter of 2022. The company reported earnings per share of $6.48 and beat expectations by $0.12. Diamondback Energy, Inc. (NASDAQ:FANG) generated a revenue of $2.44 billion for the quarter, up 27.59% year over year, and outperformed estimates by $13.55 million. As of November 11, Diamondback Energy, Inc. (NASDAQ:FANG) has gained 46.95% year to date.
This November, Truist analyst Neal Dingmann raised his price target on Diamondback Energy, Inc. (NASDAQ:FANG) to $203 from $183 and maintained a Buy rating on the shares. As of September 30, Bridgewater Associates holds a position worth $14.4 million in Diamondback Energy, Inc. (NASDAQ:FANG) and the stock is one of Ray Dalio’s top energy stock picks.
8. Hess Corporation (NYSE:HES)
Bridgewater Associates’ Stake Value: $16,423,000
Percentage of Bridgewater Associates’ 13F Portfolio: 0.08%
On October 26, Hess Corporation (NYSE:HES) reported earnings for the fiscal third quarter of 2022. The company generated a revenue of $3.16 billion, up 77.16% year over year, and outperformed estimates by $248.77 million. Hess Corporation (NYSE:HES) reported an EPS of $1.89 and, as of November 11, has gained 89.58% so far in 2022. As of September 30, Bridgewater Associates has a stake of $16.4 million in Hess Corporation (NYSE:HES) and the investment covers 0.08% of Ray Dalio’s 13F portfolio.
On November 11, Piper Sandler analyst Ryan Todd raised his price target on Hess Corporation (NYSE:HES) to $164 from $155 and reiterated an Overweight rating on the shares. This October, Susquehanna analyst Biju Perincheril raised his price target on Hess Corporation (NYSE:HES) to $166 from $144 and maintained a Positive rating on the shares.
Hess Corporation (NYSE:HES) has a strong commitment to delivering shareholder value and has a healthy balance sheet with strong cash flows. Hess Corporation (NYSE:HES) has a trailing twelve-month operating margin of 35.45%, an ROE of 30.74%, and free cash flows of $1.15 billion. The company is well-positioned to continue to grow and create value for shareholders as the global demand for energy increases.
7. Occidental Petroleum Corporation (NYSE:OXY)
Bridgewater Associates’ Stake Value: $16,642,000
Percentage of Bridgewater Associates’ 13F Portfolio: 0.08%
On November 2, Occidental Petroleum Corporation (NYSE:OXY) announced that its board of directors has declared a quarterly cash dividend of $0.13 per common share. The dividend is payable on January 17 to stockholders of record on December 12. As of November 11, the stock is offering a forward dividend yield of 0.70% and has free cash flows of $11.47 billion.
Shares of Occidental Petroleum Corporation (NYSE:OXY) are surging in 2022 and, as of November 11, have appreciated by 139.31% year to date. On November 8, the company posted earnings for the third quarter of fiscal 2022. Occidental Petroleum Corporation (NYSE:OXY) reported an EPS of $2.44 and generated a revenue of $9.50 billion, up 39.41% year over year, outperforming consensus by $452.55 million. As of September 30, Bridgewater Associates has stakes worth $16.6 million in Occidental Petroleum Corporation (NYSE:OXY), and the stock is ranked among Ray Dalio’s top energy stock picks.
This October, Barclays analyst Jeanine Wai raised her price target on Occidental Petroleum Corporation (NYSE:OXY) to $84 from $75 and reiterated an Overweight rating on the shares. On October 19, Jefferies analyst Lloyd Byrne took coverage of Occidental Petroleum Corporation (NYSE:OXY) with a Hold rating and a $66 price target.
Here is what Smead Capital Management had to say about Occidental Petroleum Corporation (NYSE:OXY) in its third-quarter 2022 investor letter:
“Our top-performing stocks in the quarter includes Occidental Petroleum (NYSE:OXY). Oil and gas have been the best game in the stock market town this year and it was a pleasant surprise to see home builders pick up even with dour news on interest rates and the economy. For the first three quarters of the year, we should change the name of our fund to the Jed Clampett Fund. Occidental Petroleum (NYSE:OXY), was one of the standouts. Up through the bear market came a “bubblin’ crude!”
6. Marathon Oil Corporation (NYSE:MRO)
Bridgewater Associates’ Stake Value: $18,125,000
Percentage of Bridgewater Associates’ 13F Portfolio: 0.09%
Marathon Oil Corporation (NYSE:MRO) is among Ray Dalio’s top energy stock picks. As of September 30, Ray Dalio’s hedge fund owns a position worth $18 million in the company, and the investment covers 0.09% of Mr. Dalio’s 13F portfolio. Marathon Oil Corporation (NYSE:MRO) is currently trading at an attractive valuation and is presenting an optimal buying opportunity for long-term investors. As of November 11, the stock has a trailing twelve-month PE ratio of 6.31 and is awarding shareholders with a forward dividend yield of 1.09%.
Marathon Oil Corporation (NYSE:MRO) has a strong balance sheet with low debt levels. The company is profitable and has a trailing twelve-month operating margin of 45.65%. According to the company’s balance sheet, Marathon Oil Corporation (NYSE:MRO) has free cash flows of $4.05 billion and a debt-to-equity ratio of 0.35.
Wall Street is bullish on Marathon Oil Corporation (NYSE:MRO). On October 18, Piper Sandler analyst Mark Lear raised his price target on Marathon Oil Corporation (NYSE:MRO) to $38 from $36 and maintained an Overweight rating on the shares. This October, Jefferies analyst Lloyd Byrne started coverage of Marathon Oil Corporation (NYSE:MRO) with a Hold rating and a $30 price target.
In addition to Marathon Oil Corporation (NYSE:MRO), Ray Dalio’s Bridgewater Associates is invested heavily in Chevron Corporation (NYSE:CVX), ConocoPhillips (NYSE:COP), and Exxon Mobil Corporation (NYSE:XOM).
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Disclosure: None. Billionaire Ray Dalio’s Top 10 Energy Stock Picks is originally published on Insider Monkey.