In this article, we discuss the 5 energy stocks hedge funds are buying. In order to read our detailed analysis of the energy sector, go directly to Hedge Funds Are Buying These 10 Energy Stocks.
5. Devon Energy Corporation (NYSE:DVN)
Number of Hedge Fund Holders: 66
Devon Energy Corporation (NYSE:DVN) is an energy company which owns and operates a range of oil and natural gas properties across the United States. The firm ranked among the top two stock performers in the S&P500 during the month of May 2022, with the company stock rising approximately 28.8% during the month. As of June 2, it has surged 67.46% in the year to date.
For Q1 2022, Devon Energy Corporation (NYSE:DVN) posted EPS of $1.88, beating estimates by $0.12. Revenue for the quarter was recorded at $3.81 billion, above analysts’ predictions by $215.9 million and signaling a 116.4% growth in comparison to the same period over last year.
On May 9, Raymond James analyst John Freeman raised the firm’s price target on Devon Energy Corporation (NYSE:DVN) to $90 from $85 and maintained a ‘Strong Buy’ rating on the shares. It features as one of Freeman’s top picks in the energy and production sector, who sees a strong balance sheet, shareholder-friendly return structure, and a deep drilling inventory making Devon Energy Corporation (NYSE:DVN) well-positioned going forward. The company also offers investors an impressive 6.66% yield as of June 2, and has recorded dividend increases for 4 years in a row.
As of the end of the first quarter, 66 hedge funds owned positions in Devon Energy Corporation (NYSE:DVN) with an aggregate value of $1.92 billion. This shows a positive trend from the previous quarter where 51 hedge funds held $1.74 billion worth of positions in the energy company. Its biggest shareholder in the first quarter was GQG Partners, with 15.03 million shares priced at $888.6 million.
4. ConocoPhillips (NYSE:COP)
Number of Hedge Fund Holders: 67
ConocoPhillips (NYSE:COP) is a Houston-based energy company which deals in the exploration and production of crude oil, bitumen, natural gas, liquefied natural gas (LNG), and natural gas liquids around the globe. The company shares have registered impressive gains in the last 12 months on the back of soaring energy prices, rising 93.31% as of June 2.
EPS for the first quarter was recorded at $3.27, beating analysts’ forecasts by $0.05. ConocoPhillips’ (NYSE:COP) revenue for the quarter stood at $19.29 billion, up 82.7% year-on-year and outperforming Street estimates by $929.7 million.
67 hedge funds held total stakes worth $2.58 billion in ConocoPhillips (NYSE:COP) at the end of the first quarter, showing improving investor confidence in the energy firm over the previous quarter where 56 hedge funds owned $1.55 billion worth of stakes in the company. Ric Dillon’s Diamond Hill Capital was the most prominent shareholder of ConocoPhillips (NYSE:COP) at the close of the first quarter, boasting a stake worth more than $702 million.
On April 25, Raymond James analyst John Freeman kept a ‘Strong Buy’ rating on ConocoPhillips (NYSE:COP) shares, and bumped the price target to $160 from $120. He notes that a diverse asset base and A-rated debt places the firm in “a league of its own,” and full exposure to strip pricing should continue to generate free cash flow.
Investment firm ClearBridge Investments was all praises for ConocoPhillips (NYSE:COP) in its Q1 2022 investor letter. The fund said:
“The energy sector, which led a strong market in 2021, generated even more dramatic relative performance in the quarter, advancing 39% and leading the benchmark Russell 1000 Value Index. Years of restrained investment in the energy sector, combined with a strong post-pandemic recovery, contributed to the higher commodity prices. The upward pressure escalated with the Russian invasion of Ukraine. Our energy holdings ConocoPhillips (NYSE:COP) benefited from higher commodity prices and was among the top contributors to first-quarter performance.”
3. Occidental Petroleum Corporation (NYSE:OXY)
Number of Hedge Fund Holders: 67
Occidental Petroleum Corporation (NYSE:OXY) deals in the acquisition and development of oil and natural gas properties across the United States, the Middle East, Africa, and Latin America. Warren Buffett recently bought billions of dollars worth of the company shares, with his Berkshire Hathaway standing as the firm’s largest Q1 shareholder with 136,37 million shares valued at $7.73 billion. In total, 67 hedge funds were long Occidental Petroleum Corporation (NYSE:OXY) at the end of the first quarter, up from 58 hedge funds a quarter earlier.
On May 31, Mizuho analyst Vincent Lovaglio reiterated a ‘Buy’ rating on Occidental Petroleum Corporation (NYSE:OXY) shares, and increased the price target to $89 from $85. Energy prices around the world have soared on account of a global undersupply, but macro uncertainty, supply chain and logistics constraints, and a shift in corporate behavior act as headwinds for this growth trajectory, according to Lovaglio. He views this as favoring the US exploration and production companies, and raised his price targets by 3% on average, maintaining his preference of gas over oil-weighted firms.
For the quarter ending March, Occidental Petroleum Corporation (NYSE:OXY) reported earnings per share of $2.12, which exceeded estimates by $0.09. Quarterly revenue was recorded at $8.53 billion, up 55.7% in comparison to the same period over last year, and outperforming Street estimates by $473.1 million.
Smead Capital Management, in its Q3 2021 investor letter, talked about Occidental Petroleum Corporation (NYSE:OXY). Here’s what they said:
“Oil stocks dominated our winners for the quarter. We showed that we have unlimited ability to tempt fate by buying into Occidental Petroleum (OXY) this year after it was our biggest loser of 2020. It gained 16.64% during the third quarter.”
2. Freeport-McMoRan Inc. (NYSE:FCX)
Number of Hedge Fund Holders: 68
BMO Capital analyst David Gagliano on April 22 gave Freeport-McMoRan Inc. (NYSE:FCX) an ‘Outperform’ rating, and a price target of $56, down from $62. Although he lowered his 2022 EPS estimates to reflect higher unit cost expectation, the analyst sees the firm well-positioned to benefit from a rise in underlying copper prices.
Out of the 900+ elite hedge funds tracked by Insider Monkey, 68 owned $4.1 billion worth of positions in Freeport-McMoRan Inc. (NYSE:FCX) at the end of March. This showed a positive trend over the previous quarter, where a total of 66 hedge funds held $3.77 billion worth of stakes in the company. The hedge fund with the largest stake in Freeport-McMoRan Inc. (NYSE:FCX) at the end of Q1 2022 was Fisher Asset Management, with 50.75 million shares worth $2.52 billion.
Horizon Kinetics LLC, an investment management firm, talked about Freeport-McMoRan Inc. (NYSE:FCX) in its Q4 2021 investor letter. The firm said:
“Those were some ideas about copper demand. Here are some specifics about supply. Global copper mine production in the 10 years from 2005 to 2015 rose 2.45% annually. In the next 5 years, to 2020, it increased by only 0.9% annually. Even ignoring the 2020 pandemic year, for the 4 years from to 2019, the expansion rate was 1.66%. We already have the historical context for this: the commodity price collapse prior to 2015, from a position of excess capacity.
What producers must do in that situation, because they have high fixed costs and debt expense, is curtail their exploration and development expenditures and reduce operating costs. They rely on existing mines, instead, and on their highest-grade ores and lowest-cost production. They might not actually reduce current production, but they aren’t replacing the reserves that are being slowly drawn down. You can see this at work at the individual company level.
Freeport-McMoRan will illustrate. It is the world’s third-largest copper producer, closely following Chile’s Codelco and Australia’s BHP Group. In 2014, even though Freeport sold more copper than the prior year, its revenues dropped by over 25%, and it went from $4.8 billion of operating earnings (a 22% margin) to a $(0.2) billion loss. The company’s capital expenditures peaked in 2014 at $3.86 billion and will be about $1.72 billion in 2021, meaning the company is spending 55% less now than it was seven years ago. In inflation-adjusted terms, it’s spending 61% less today than seven years ago…” (Click here to see the full text)
1. Exxon Mobil Corporation (NYSE:XOM)
Number of Hedge Fund Holders: 83
Exxon Mobil Corporation (NYSE:XOM) was hedge funds’ favorite energy stock at the end of the first quarter of 2022, where 83 reported bullish bets on the company shares, in contrast to 71 hedge funds a quarter earlier. The combined value of Q1 hedge fund holdings stood at $8.55 billion.
Based in Texas, Exxon Mobil Corporation (NYSE:XOM) deals in the production, transportation and sale of crude oil, natural gas, petroleum products and other petrochemicals around the globe. With a market cap of $411.4 billion, Exxon Mobil Corporation (NYSE:XOM) is one of the world’s largest firms by revenue. It is also a notable dividend payer, with 39 consecutive years of payout increases and a yield of 3.60% as of June 2.
For the first quarter of 2022, Exxon Mobil Corporation (NYSE:XOM) reported an EPS of $2.07, falling short of analysts’ estimates by $0.16. Quarterly revenue increased 53% year-over-year to reach $90.50 billion, outperforming consensus estimates by $5.62 billion. As of June 2, the company shares have experienced a surge of 59.64% in the last 12 months, and 10.75% in the last month.
Barclays analyst Jeanine Wai on May 31 kept an ‘Overweight’ rating on Exxon Mobil Corporation (NYSE:XOM) shares, and raised the firm’s price target to $111 from $98. The analyst sees slightly more upside to the company shares in comparison to rival Chevron (NYSE:CVX).
Investment firm Goehring & Rozencwajg Associates talked about many stocks in its Q3 2021 investor letter, and Exxon Mobil Corporation (NYSE:XOM) was one of them. Here’s what 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 publicly 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 11 Best Value Stocks To Buy According To Warren Buffett and 10 Best Stocks to Buy According to Peter Lewis’ LFL Advisers.
