We recently compiled a list of the 10 Best Energy Stocks To Buy According to Hedge Funds. In this article, we are going to take a look at where Chevron Corporation (NYSE:CVX) stands against the other energy stocks.
In an interview on October 3 with CNBC, Andy Critchlow, who serves as the head of news for the EMEA region at S&P Global Commodity Insights, discussed the current state of the oil market and the potential implications of various geopolitical events on oil prices.
Critchlow noted that the oil market is facing “dangerous times” due to a high level of geopolitical risk and that it’s hard for anyone in that market to gauge the direction of the market. However, he pointed out that this geopolitical uncertainty has not yet been reflected in the price of oil, despite events between Israel and Iran and numerous attacks on oil shipping in the Strait of Hormuz over the past two years. The price of oil has not surged significantly and there is no geopolitical risk premium as oil still is currently trading at less than $75 per barrel.
Critchlow also discussed the potential impact of a disruption to Iranian oil supplies, which account for around 4% of global supply. He noted that any attack on Iranian oil facilities or refineries could have a significant knock-on effect in the region. However, Critchlow noted that the market is looking ahead to next year and the potential for an excessive supply, there is already an idled supply of 5.6 million barrels per day on the sidelines.
According to Critchlow, the oil market is also challenged by supply and demand imbalances and the potential for a price war between OPEC+ members is a real concern. Critchlow commented on recent comments from the Saudi Energy Minister on October 2, who warned of the potential for $50 oil if OPEC+ members don’t stick to agreed-upon production limits. Critchlow interpreted this as a veiled threat, suggesting that Saudi Arabia may be prepared to start a price war if other members of the OPEC+ alliance do not comply with production cuts.
According to Critchlow, Russian crude was displaced from its traditional European markets and flowed into China and India, which are some of the biggest drivers for the oil market. These were the markets that Saudi Arabia effectively owned with its major Gulf partners in OPEC and that is why Saudi’s market has been squeezed in its core markets by Russia.
While the current price of oil remains relatively stable, the underlying risks and challenges suggest that a significant shift in the market could be on the horizon. With that in context let’s take a look at the 10 best energy stocks to buy according to hedge funds.
A tanker truck making its way through a refinery facility.
Our Methodology
To compile our list of the 10 best energy stocks to buy according to hedge funds, we used the Finviz and Yahoo stock screeners to find the largest energy companies. We then narrowed our choices to 10 stocks according to their hedge fund sentiment, which was taken from our database of 912 elite hedge funds as of Q2 of 2024. The list is sorted in ascending order of their hedge fund sentiment, as of the second quarter.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Chevron Corporation (NYSE:CVX)
Number of Hedge Fund Investors: 64
Chevron Corporation (NYSE:CVX) is a prominent vertically integrated company operating globally in the oil and gas exploration, production, and refining sectors. Beyond its traditional operations, Chevron Corporation (NYSE:CVX) is also making investments in green energy technologies and services, including wind, solar, and biofuels.
Chevron Corporation (NYSE:CVX) aims to target 1 million barrels of oil per day in the Permian Basin. On October 14, the company announced to increase in its oil and gas production in the Permian Basin, a region renowned for its oil and gas reserves. The company has targeted production of 1 million boe/d by 2025 in the New Mexico end of the Permian.
Chevron Corporation’s (NYSE:CVX) New Mexico asset manager, Duncan Healey, highlighted the area’s high-quality and untapped reserves as key factors for this expansion. According to Healey, Chevron Corporation (NYSE:CVX) expects better production than from other areas of the Permian and can extract oil and gas easily. The company is also adopting cleaner technology such as using electrical compressors instead of natural gas fuelled to reduce the carbon intensity of its operations.
Chevron Corporation (NYSE:CVX) has also begun oil and natural gas production from the Anchor project in the deepwater U.S. Gulf of Mexico by using high-pressure technology that can operate safely at up to 20,000 psi, with reservoir depths reaching 34,000 feet below sea level. The Anchor semi-submersible floating production unit (FPU) has a design capacity of 75,000 gross barrels of oil per day and 28 million gross cubic feet of natural gas per day. The development consists of seven subsea wells tied into the Anchor FPU, located in the Green Canyon area, approximately 140 miles off the coast of Louisiana, in water depths of approximately 5,000 feet. The total potential recoverable resources from the Anchor field are estimated to be up to 440 million barrels of oil equivalent.
Overall CVX ranks 5th on our list of the best energy stocks to buy according to hedge funds. While we acknowledge the potential of CVX as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CVX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.