Goldman Sachs’ Top Fund Manager Stock Picks: 25 Best Overweight Stocks

15. ConocoPhillips (NYSE:COP)

Number of Hedge Fund Holders In Q2 2024: 72

Overweight Percentage: 0.11%

ConocoPhillips (NYSE:COP) is an American oil exploration and production company with significant exposure to the US shale oil industry. This means that the firm’s stock is more in tune with the broader state of the US shale oil industry. Consequently, ConocoPhillips (NYSE:COP)’s shares are down 11% year to date as weaker oil prices due to a sluggish Chinese economy have translated into headwinds for the stock. For instance, ConocoPhillips (NYSE:COP)’s shares dropped by 3.7% at the September start after growth in OPEC production and slower Chinese demand pushed Brent crude prices below $75 and West Texas Intermediate below $71. Subsequently, ConocoPhillips (NYSE:COP)’s performance depends on the broader state of the oil industry, and with the oil sector remaining weak, market focus has increased on business and cost management. On this front, the firm could benefit from lower operating costs once it fully absorbs Marathon Petroleum in its portfolio following the closure of the mega $22.5 billion merger. Analysts expect that the deal can improve ConocoPhillips (NYSE:COP)’s EPS/Cash Flow Per Share by as much as 7% and bump the free cash flow per share by 11%. Pressure is high on ConocoPhillips (NYSE:COP) to deliver with the deal due to its expensive price tag.

ConocoPhillips (NYSE:COP)’s management commented on the deal during the Q2 2024 earnings call:

“Now regarding our planned acquisition of Marathon Oil, we remain very excited about this transaction and integration planning activities are underway to ensure a seamless transition upon close.

The Marathon Oil shareholder vote has been set for August 29, and we are working through the FTC’s second request that we received in mid-July. We still expect to close the transaction late in the fourth quarter. On return of capital, we remain committed to distributing at least $9 billion to shareholders this year on a stand-alone basis. As we said back in May, we will be incorporating our VROC into our base dividend starting in the fourth quarter, representing a 34% increase in the ordinary dividend. And consistent with our long-term track record, we are confident that we can grow this dividend at a top quartile rate relative to the S&P 500. Finally, as we previously announced with the Marathon acquisition, we will be increasing our annualized buyback run rate by $2 billion upon closing with a plan to retire the equivalent amount of newly issued equity in 2 to 3 years.”