Goldman Sachs Energy Stocks: Top 10 Stock Picks

Published on November 8, 2022 at 5:08 pm by Hamna Asim in Hedge Funds, News

In this article, we discuss the top 10 energy stock picks of Goldman Sachs. If you want to see more stocks in this selection, check out Goldman Sachs Energy Stocks: Top 5 Stock Picks.

Jan Hatzius, Goldman Sachs’ chief economist, noted that there is a “very plausible” scenario where the US economy can steer clear of a recession, regardless of the Federal Reserve’s hawkish interest rate tightening and geopolitical unrest. On November 7, Goldman Sachs reaffirmed a 35% probability that the US economy will experience a slowdown in the next year, which is decidedly below Wall Street estimates. Jan Hatzius said that the path to growth “has already occurred, and it looks durable.”

Goldman Sachs believes that a soft landing is possible, which means that inflation will slow down and the economy will continue to grow, and the investment firm cited a slowdown in nominal wage growth as the key indicator for this scenario. Jan Hatzius also mentioned October payroll numbers, supplier deliveries, second-hand car auction prices, and rents on new leases as some other reasons to expect reduced inflation.

However, Goldman Sachs’ opinion is not popular on Wall Street. A majority of the economists believe that the United States will slip into a recession for the Fed to finally control mounting prices. In this uncertain macro environment, it is a good idea to look for defensive sectors as a safe haven for investments, with energy being one of them. Keeping that in mind, we reviewed the Goldman Sachs equity portfolio for the second quarter of 2022 and some of the top Goldman Sachs energy stocks were Exxon Mobil Corporation (NYSE:XOM), Enphase Energy, Inc. (NASDAQ:ENPH), and Energy Transfer LP (NYSE:ET).

Our Methodology

We selected the top 10 energy stock picks from the Goldman Sachs stock portfolio as of the end of the second quarter of 2022 for this analysis. Insider Monkey’s database of 895 elite hedge funds tracked as of the end of the second quarter of 2022 was used to assess the hedge fund sentiment around the securities.

Photo by David Thielen on Unsplash

Goldman Sachs Energy Stocks: Top Stock Picks

10. Cheniere Energy, Inc. (NYSE:LNG)

Number of Hedge Fund Holders: 65

Goldman Sachs’ Stake Value: $391,589,000

Cheniere Energy, Inc. (NYSE:LNG) is a Texas-based energy infrastructure company engaged in liquefied natural gas businesses in the United States. Goldman Sachs owned 2.94 million shares of Cheniere Energy, Inc. (NYSE:LNG) in Q2 2022, worth $391.6 million and representing 0.08% of the total holdings.

On October 25, Cheniere Energy, Inc. (NYSE:LNG) declared a $0.395 per share quarterly dividend, a 19.7% increase from its prior dividend of $0.330. The dividend is payable on November 16, to shareholders of record on November 8.

Jefferies analyst Sam Burwell on October 19 initiated coverage of Cheniere Energy, Inc. (NYSE:LNG) with a Buy rating and a $210 price target. He believes the “Option Value” of energy is up again, supported by a limited capital cycle.

According to Insider Monkey’s data, 65 hedge funds were bullish on Cheniere Energy, Inc. (NYSE:LNG) at the end of the second quarter of 2022, compared to 62 funds in the prior quarter. Carl Icahn’s Icahn Capital LP is the largest stakeholder of the company, with 5.6 million shares worth $746.5 million.

Like Exxon Mobil Corporation (NYSE:XOM), Enphase Energy, Inc. (NASDAQ:ENPH), and Energy Transfer LP (NYSE:ET), Cheniere Energy, Inc. (NYSE:LNG) is one of the top energy stocks from the Goldman Sachs portfolio.

Here is what ClearBridge Global Infrastructure Value Strategy has to say about Cheniere Energy, Inc. (NYSE:LNG) in its Q3 2021 investor letter:

“Cheniere Energy is an energy infrastructure company that owns and operates U.S. liquefied natural gas (LNG) export facilities. Strong quarterly results and the disclosure of capital allocation policies were positively received by the markets. In addition, continued supply and demand tightness in the LNG market created a favorable commodity price environment.”

9. Shell plc (NYSE:SHEL)

Number of Hedge Fund Holders: 39

Goldman Sachs’ Stake Value: $413,720,000

Shell plc (NYSE:SHEL) is a London-based energy and petrochemical company that operates worldwide via Integrated Gas, Upstream, Marketing, Chemicals and Products, and Renewables and Energy Solutions segments. On October 27, Shell plc (NYSE:SHEL) declared a $0.50 per average diluted share quarterly dividend, in line with previous. The dividend is payable on December 19, to shareholders of record on November 11. The company also announced $4 billion in share buybacks and plans to raise the dividend by 15% in the fourth quarter of 2022.

Securities filings for Q2 2022 reveal that Goldman Sachs owned 7.9 million shares of Shell plc (NYSE:SHEL) worth $413.72 million, representing 0.09% of the total holdings.

On November 6, Goldman Sachs analyst Michele Della Vigna downgraded Shell plc (NYSE:SHEL) to Neutral from Buy with a price target of $76, down from $79. The analyst cited valuation for the downgrade after the stock’s outperformance. Shell plc (NYSE:SHEL)’s continuous improvement in corporate returns and historically high cash flow has resulted in a “relatively expensive valuation” versus peers, the analyst wrote in a research note.

According to Insider Monkey’s data, 39 hedge funds were bullish on Shell plc (NYSE:SHEL) at the end of June 2022, compared to 37 funds in the preceding quarter. Ken Fisher’s Fisher Asset Management is the leading stakeholder of the company, with 20.25 million shares worth $1.06 billion.

Here is what Harding Loevner International Equity Fund has to say about Shell plc (NYSE:SHEL) in its Q1 2022 investor letter:

“While risks of unforeseen consequences arising from the Ukraine conflict are high, on this front we are cautiously optimistic that China will work hard to maintain its neutrality in a credible way, as it is a huge beneficiary of trade with the rest of the world, especially the rich developed nations. We think it likely that China, along with India, will continue to buy oil and gas from Russia (just as Europe, at least for now, plans to keep its gas pipelines open), and do not expect that fact to alter China’s trade relations with the West much. Nevertheless, we must contemplate that our optimism is misplaced on the importance of membership in the global network of exchange. If our central and optimistic case—admittedly an educated guess—is wrong, then we’d need to greatly modify our views of which companies in our opportunity set will face new barriers to profitable growth, and which might stand to benefit, relatively, from a further receding of globalization. (Global trade, after all, has never matched the peak share of GDP it reached in 2008, before the Global Financial Crisis.) We’d expect such a world to be less efficient, as the cold logic of comparative advantage is demoted as a determinant of which goods or services are produced and where. That would lead to a less prosperous world, since exploiting comparative advantage is a cornerstone of wealth creation. If regional blocs began to raise limits on the movement of capital as well as goods, we’d need to parse which of our multinational companies were at risk of declining sales from increasingly hostile, siloed countries. Royal Dutch Shell (NYSE:SHEL) has found its Siberian oil and gas joint venture assets stranded by the combination of sanctions and the public opprobrium of Russia’s actions.”

8. ConocoPhillips (NYSE:COP)

Number of Hedge Fund Holders: 71

Goldman Sachs’ Stake Value: $628,774,000

ConocoPhillips (NYSE:COP) is a Texas-based company that produces, transports, distributes, and markets crude oil, bitumen, natural gas, liquefied natural gas, and natural gas liquids worldwide. In Q2 2022, Goldman Sachs owned more than 7 million ConocoPhillips (NYSE:COP) shares worth $628.8 million, representing 0.14% of the total portfolio. It is one of the premier Goldman Sachs energy stocks to monitor.

On November 3, ConocoPhillips (NYSE:COP) declared a $0.51 per share quarterly dividend, a 10.9% increase from its prior dividend of $0.46. The dividend is payable on December 1, to shareholders of record on November 15. The company also announced that the board of directors approved a $20 billion increase in the current share repurchase program to $45 billion.

Truist analyst Neal Dingmann on November 7 raised the price target on ConocoPhillips (NYSE:COP) to $167 from $149 and maintained a Buy rating on the shares after its Q3 earnings beat. The company’s financial and operational positions are “enviable” with almost no debt, record production, and quality inventory, the analyst told investors in a research note. Although there has been some investor pushback given ConocoPhillips (NYSE:COP) stock hit a recent all-time high, he believes that the valuation “still looks very reasonable”.

According to Insider Monkey’s data, 71 hedge funds were long ConocoPhillips (NYSE:COP) at the end of June 2022, compared to 67 funds in the prior quarter. Ric Dillon’s Diamond Hill Capital is one of the leading position holders in the company, with 6.58 million shares worth approximately $592 million.

Diamond Hill Capital made the following comment about ConocoPhillips (NYSE:COP) in its Q3 2022 investor letter:

“On an individual holdings basis, top contributors to return included oil and gas producer ConocoPhillips (NYSE:COP) and global technology company Nasdaq.

The rising price of both oil and natural gas has allowed ConocoPhillips to continue reporting strong earnings and cash flow growth even as the economic outlook becomes more uncertain. We continue to believe the company is an outstanding operator with a strong balance sheet and assets concentrated in well understood jurisdictions. While supply chain tightness has driven input prices higher within the industry, ConocoPhillips has kept its production and capex guidance steady for the full year as its longer-term service contracts help it push costs out into the future as compared to smaller competitors.”

7. Chevron Corporation (NYSE:CVX)

Number of Hedge Fund Holders: 59

Goldman Sachs’ Stake Value: $840,667,000

Chevron Corporation (NYSE:CVX) is one of the top Goldman Sachs energy stocks to monitor. The firm held 5.80 million shares of Chevron Corporation (NYSE:CVX) in the second quarter of 2022, worth $840.6 million and representing 0.18% of the total securities.

On October 26, Chevron Corporation (NYSE:CVX) declared a $1.42 per share quarterly dividend, in line with previous. The dividend is payable on December 12, to shareholders of record on November 18. Chevron Corporation (NYSE:CVX) also posted market-beating Q3 results and had a free cash flow of $12.3 billion during the period.

Cowen analyst Charles Ryhee raised the price target on Chevron Corporation (NYSE:CVX) on October 31 to $185 from $160 and maintained an Outperform rating on the shares. The analyst noted that 2023 capex was guided to the high end of the mid-term range while 2022 Permian growth was guided to the low end of the range.

According to Insider Monkey’s data, 59 hedge funds were bullish on Chevron Corporation (NYSE:CVX) at the end of June 2022, compared to 53 funds in the last quarter. Warren Buffett’s Berkshire Hathaway held the biggest stake in the company, with 161.4 million shares worth $23.3 billion.

Diamond Hill Capital mentioned Chevron Corporation (NYSE:CVX) in its Q1 2022 investor letter. Here is what the firm had to say:

“Other top contributors in Q1 included multinational energy company Chevron Corp. (NYSE:CVX). The company benefited from increased energy demand as COVID-related economic restrictions eased in tandem with concerns regarding supply interruptions related to Russia’s invasion of Ukraine.”

6. NextEra Energy, Inc. (NYSE:NEE)

Number of Hedge Fund Holders: 59

Goldman Sachs’ Stake Value: $867,952,000

Another prominent Goldman Sachs energy pick is NextEra Energy, Inc. (NYSE:NEE), a Florida-based company that generates, transmits, and distributes electric power to retail and wholesale customers in North America. The company generates electricity through wind, solar, nuclear, coal, and natural gas facilities. In Q2 2022, Goldman Sachs held 11.20 million shares of NextEra Energy, Inc. (NYSE:NEE) worth $868 million, representing 0.19% of the total securities.

On October 24, Guggenheim analyst Shahriar Pourreza reiterated a Buy rating on NextEra Energy, Inc. (NYSE:NEE) but lowered the price target on the shares to $99 from $108. The analyst updated select estimates ahead of Q3 earnings season from the Power and Utilities group to reflect “known and measurable year-over-year items”, to adjust for seasonality, and to re-mark to the latest commodity curves.

According to Insider Monkey’s data, 59 hedge funds were long NextEra Energy, Inc. (NYSE:NEE) at the end of Q2 2022, compared to 64 funds in the preceding quarter. Jos Shaver’s Electron Capital Partners is a significant position holder in the company, with 2.65 million shares worth $205 million.

In addition to Exxon Mobil Corporation (NYSE:XOM), Enphase Energy, Inc. (NASDAQ:ENPH), and Energy Transfer LP (NYSE:ET), NextEra Energy, Inc. (NYSE:NEE) is one of the top energy stock picks of elite hedge funds.

In its Q2 2022 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and NextEra Energy, Inc. (NYSE:NEE) was one of them. Here is what the fund said:

“We increased our exposure to the energy transition during the quarter with new positions in Iberdrola (OTCPK:IBDSF), a Spanish-based integrated utility that is also one of the leading renewable energy developers in the world, and NextEra Energy, Inc. (NYSE:NEE), an integrated utility business with a regulated utility operating in Florida and the largest wind business in the U.S. The war has opened the eyes of the world that energy independence is critical. Renewables are for many countries the only way to get to the target. It is expected that existing renewable project pipelines will be executed faster, and more projects added to existing pipelines.

The energy transition would be extremely helpful for climate change and Iberdrola ranks well on our ESG matrix. NextEra, meanwhile, recently raised future earnings forecasts, citing a very favorable macro environment for rapid renewable generation expansion driven by decarbonization of the U.S. economy and the relative attractiveness of renewable generation in the context of high natural gas and power prices.”

Click to continue reading and see Goldman Sachs Energy Stocks: Top 5 Stock Picks.

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