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 Devon Energy Corporation (NYSE:DVN) 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 chart showing the trend of the energy sector’s stock prices.
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).
Devon Energy Corporation (NYSE:DVN)
Number of Hedge Fund Investors: 52
Devon Energy Corporation (NYSE:DVN) is an independent oil and natural gas exploration and production company headquartered in the United States. The company primarily operates in North America and focuses on high-quality oil and gas resources.
On September 27, Devon Energy Corporation (NYSE:DVN) finalized the acquisition of Grayson Mill for $5 billion. This strategic move in the Williston Basin will add 307,000 net acres to the company’s portfolio and is expected to contribute 100,000 barrels of oil equivalent per day (BOE/D) to its production in FY 2025. The deal is anticipated to be accretive to earnings and is scheduled to close by the end of the third quarter. Commenting on the event Rick Muncrief, President and CEO of Devon Energy Corporation (NYSE:DVN) said:
“We are excited to announce the completion of our acquisition of Grayson Mill Energy. This strategic transaction is an excellent fit for Devon, enabling us to efficiently expand our operating scale and production,”
In Q2, Devon Energy Corporation reported revenues of $3.9 billion, an 8.9% increase from the previous quarter, with a net income of $844 million and earnings per share (EPS) of $1.41. The company has also raised its stock buyback authorization to $5 billion, an increase of 67%, enhancing its appeal as a capital return investment.
Overall DVN ranks 8th on our list of the oversold tech stocks to buy. While we acknowledge the potential of DVN 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 DVN 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.
