Jim Cramer’s 5 Favorite Energy and Bank Stock Picks

In this article, we will discuss the 5 favorite energy and bank stock picks of Jim Cramer. If you want to explore similar stocks, you can go to Jim Cramer’s Favorite Energy and Bank Stock Picks.

5. Capital One Financial Corporation (NYSE:COF)

Number of Hedge Fund Holders: 52

Jim Cramer likes Capital One Financial Corporation (NYSE:COF) and mentioned the stock among his top bank stock picks. Cramer likes the company’s leadership and noted that Capital One Financial Corporation (NYSE:COF) reported “remarkable growth and defaults still well-below the heyday before the pandemic” in its earnings report for fiscal Q4 2022. Capital One Financial Corporation (NYSE:COF) is one of Jim Cramer’s favorite bank stock picks.

On January 24, Capital One Financial Corporation (NYSE:COF) posted earnings for the fourth quarter of fiscal 2022. The company reported an EPS of $2.82 and generated a revenue of $9.04 billion, up 11.36% year over year.

Shortly after the company’s earnings release, JPMorgan analyst Richard Shane updated his price target on Capital One Financial Corporation (NYSE:COF) to $120 from $124 and maintained an Overweight rating on the shares.

Capital One Financial Corporation (NYSE:COF) was a part of 52 hedge funds’ portfolios at the end of Q3 2022. The total stakes of these hedge funds amounted to $2.94 billion. As of December 31, Pzena Investment Management is the largest shareholder in the company and has a position worth $555.18 million.

Here is what Oakmark Funds had to say about Capital One Financial Corporation (NYSE:COF) in its Q4 2022 investor letter:

“Additionally, we initiated a position in Capital One Financial Corporation (NYSE:COF) during the quarter. Capital One is one of the largest issuers of Visa and Mastercard credit cards in the U.S. The company also has a banking network, offers auto and home loans, and manages assets for institutional and high-net-worth clients. We like that Capital One possesses a strong capital position and a common equity tier-1 ratio that exceeds both regulators’ requirements as well as the company’s own internal target. We appreciate the company’s good underwriting track record and its history of lower than expected loss rates given its business mix and yield. In our view, Capital One’s management team is focused on the long term as evidenced by its consistent reinvestment in technology development, and its online/branch bank provides a stable deposit base with decent funding cost. At roughly 5x 2022 consensus earnings and 1.1x tangible book value per share, the stock trades at a significant discount to the market and our estimate of intrinsic value.”

4. SLB (NYSE:SLB)

Number of Hedge Fund Holders: 63

SLB (NYSE:SLB) is one of Jim Cramer’s favorite energy stock picks from the oil services sector. Cramer said that “SLB (NYSE:SLB) reported a nice top and bottom line” in Q4 2022. Although the company’s cash flow was a “little light”, Cramer noted that the company also gave “a 43% dividend boost”.

On January 20, SLB (NYSE:SLB) posted strong earnings for the fourth quarter of fiscal 2022. The company reported an EPS of $0.71 and beat EPS estimates by $0.03. The company reported a revenue of $7.88 billion, up 26.57% year over year and ahead of Wall Street consensus by $83.17 million. The company also declared a quarterly cash dividend of $0.25 per share, up 42.9% from its prior dividend of $0.17. The dividend is payable on April 6 to investors of record on February 8. As of February 3, SLB (NYSE:SLB) is offering a forward dividend yield of 1.80%.

This January, HSBC analyst Abhishek Kumar raised his price target on SLB (NYSE:SLB) to $75 from $56.80 and maintained a Buy rating on the shares.

At the end of Q3 2022, 63 hedge funds were long SLB (NYSE:SLB) and held stakes worth $2.44 billion in the company. As of December 31, Bourgeon Capital is the leading shareholder in SLB (NYSE:SLB) and has a position worth $7.38 million in the company.

3. Chevron Corporation (NYSE:CVX)

Number of Hedge Fund Holders: 66

Oil giant Chevron Corporation (NYSE:CVX) is also a part of Cramer’s favorite energy stock picks. Cramer mentioned the stock more than once in his recent programs. Cramer also noted that the company announced a hefty share buyback plan and also boosted its dividend. He also said that he would buy the stock right now.

On January 25, Chevron Corporation (NYSE:CVX) declared a quarterly cash dividend of $1.51 per share, up 6.3% from its prior dividend of $1.42. The dividend is payable on March 10 to investors of record on February 16. The company also announced a share repurchase program worth $75 billion that is expected to take effect on April 1, 2023. As of February 3, Chevron Corporation (NYSE:CVX) is offering a forward dividend yield of 3.52%.

This January, Truist analyst Neal Dingmann raised his price target on Chevron Corporation (NYSE:CVX) to $179 from $169 and reiterated a Hold rating on the shares.

At the end of Q3 2022, 66 hedge funds were bullish on Chevron Corporation (NYSE:CVX) and disclosed positions worth $27.13 billion in the company. As of December 31, Bailard Inc is the most prominent shareholder in the company and has a stake worth $4.26 million.

Here is what Madison Funds had to say about Chevron Corporation (NYSE:CVX) in its fourth-quarter 2022 investor letter:

“This quarter we are highlighting Chevron Corporation (NYSE:CVX) as a relative yield example in the Energy sector. CVX is a leading integrated oil company with exploration, production, and refining operations. It is the second largest oil company in the United States with more than 70% of production volumes from oil and liquid-linked natural gas. We believe it has a sustainable competitive advantage due to its scale and low-cost position. It has a large acreage position in the Permian Basin, which is a high-quality oil field. CVX was an early mover in the Permian and did not overpay to enter the oilfield; 75% of its position has a no or low royalty rate, which gives it a cost advantage over competitors.

Our thesis is that free cash flow growth per share is expected to accelerate due to disciplined capital spending, rising Permian production volumes, and stock repurchases. The company has also made important investments in low-carbon areas like greenhouse gas reduction, carbon capture, hydrogen, and renewable fuels which we believe will pay off later in the decade as the world transitions more to renewable energy sources…” (Click here to read the full text)

2. Wells Fargo & Company (NYSE:WFC)

Number of Hedge Fund Holders: 77

Cramer thinks Wells Fargo & Company (NYSE:WFC) “is about to take off”. Cramer disclosed that his charitable trust has a stake in the company. Cramer also noted that Wells Fargo & Company (NYSE:WFC) “is slowly but surely moving up” and “it is ridiculously cheap” even at current levels. As of February 3, Wells Fargo & Company (NYSE:WFC) is trading at a PE multiple of 15x and is offering a forward dividend yield of 2.54%. Wells Fargo & Company (NYSE:WFC) is one of Jim Cramer’s favorite bank stock picks.

On January 17, Citi analyst Keith Horowitz raised his price target on Wells Fargo & Company (NYSE:WFC) to $52 from $48 and maintained a Buy rating on the shares.

At the close of the third quarter of 2022, 77 hedge funds held stakes in Wells Fargo & Company (NYSE:WFC). The total value of these stakes amounted to $4.95 billion. As of December 31, Pzena Investment Management is the dominant shareholder in the company with a stake worth $731.2 million.

Here is what Oakmark Funds had to say about Wells Fargo & Company (NYSE:WFC) in its third-quarter 2022 investor letter:

“Wells Fargo & Company (NYSE:WFC) has been a long-time holding in the Oakmark Fund. Despite the positives of higher interest rates and the company making good progress on reducing expenses and regulatory consent orders, Wells Fargo shares have fallen one-third from their highs earlier this year to roughly 6.5x our estimate of normalized earnings power, and the stock ended the quarter at ~1x next year’s tangible book value. We find this is far too cheap for a strong banking franchise capable of tangible returns in the low-to-mid teens across business cycles.”

1. JPMorgan Chase & Co. (NYSE:JPM)

Number of Hedge Fund Holders: 110

Another one of Jim Cramer’s favorite bank stock picks is JPMorgan Chase & Co. (NYSE:JPM). Cramer likes JPMorgan Chase & Co. (NYSE:JPM) because “it’s still cheap”. As of February 3, the stock is trading at a PE multiple of 11x.

On January 17, Citi analyst Keith Horowitz raised his price target on JPMorgan Chase & Co. (NYSE:JPM) to $165 from $150 and maintained a Buy rating on the shares.

At the end of Q3 2022, 110 hedge funds held stakes in JPMorgan Chase & Co. (NYSE:JPM). The total value of these stakes amounted to $6.41 billion. As of December 31, Greenhaven Associates is the most prominent shareholder in the company and has a position worth $643.11 million.

Here is what Vltava Fund had to say about JPMorgan Chase & Co. (NYSE:JPM) in its Q3 2022 investor letter:

“We regard JPM to be the strongest and best- managed bank in the world. It is a leader in investment banking, commercial banking, credit cards, and asset management. Its size (the largest bank in the USA, with nearly USD 4,000 billion in assets) and diversification give it a strong competitive advantage that is compounded by its cost advantages and the high costs to clients associated with switching banks. JPM’s management prides itself on running the only large bank to avoid major instability over the long term.

JP Morgan’s quality and strength first became fully evident in 2008 under the leadership of its CEO Jamie Dimon. Not only did JP Morgan help to stabilize the market by taking over the failing Bear Stearns in the spring of that year, but throughout the Great Financial Crisis it was the only big US bank that did not require government assistance and it was highly profitable even in the difficult year of 2008.

A well-functioning and efficient bank can be a very good long-term investment, because the interest compounding effect works well here. JPM’s return on equity (ROE) is well into the double digits and this puts it in a good position to continue producing better long-term returns than does the market. JPM has been very profitable even during years when interest rates were close to zero. The current – and perhaps not temporary – return to somewhat more normal, higher interest rates should have a significantly positive impact on the bank’s interest income and overall profitability.”

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