We recently compiled a list of the 10 Worst Performing Blue Chip Stocks in 2024. In this article, we are going to take a look at where Occidental Petroleum Corporation (NYSE:OXY) stands against the other worst performing blue chip stocks in 2024.
Strong Market Performance Amid Uncertainty
The third quarter ended with a bang, with all the major indices near record highs as investors shunned macroeconomic instability, soaring geopolitical tensions and U.S. election uncertainty. Strong gains in the quarter were fuelled by expectations of lower interest rates heading into year-end and growing expectations of a soft landing of the U.S. economy.
Artificial intelligence has been a big success story that has helped push the equity markets to record highs. Against the overall trend, the current bull market had a better second year, up 33% compared to the historical average of 13%, and a better first year, up 22% compared to the historical average of 44%, according to BofA. It’s also important to remember that even bull markets’ third years of growth can be rocky.
READ ALSO: 10 Most Promising Future Stocks According to Analysts and 10 Most Promising Growth Stocks According to Hedge Funds.
While the S&P 500 has gained over 60% since the 2022 lows, researchers at BofA note that there could be a significant pullback in the near future.
“Historical studies suggest that the third year of a typical bull market tends to be unremarkable as a mild bout of de-rating overshadows humdrum earnings growth,” BofA equity strategist Ritesh Samadhiya said in a note to clients.
Economic Concerns and Investment Opportunities
While voicing concern that the economy is running at a hotter-than-desired pace, Federal Reserve Governor Christopher Waller hinted that future interest rate cuts would be less drastic than the significant move in September. According to policymakers, recent employment, inflation, GDP, and income reports indicate that the economy might not slow down.
“While we do not want to overreact to this data or look through it, I view the totality of the data as saying monetary policy should proceed with more caution on the pace of rate cuts than was needed at the September meeting,” Waller said in prepared remarks for a conference at Stanford University.
The sentiments come as investors remain cautious about the long-term outlook amid soaring geopolitical tensions and economic uncertainties. The growing uncertainties have been one of the catalysts behind some of the worst-performing blue chip stocks in 2024.
Nevertheless, some underperforming stocks may allow investors to purchase the long-term decline. However, many are just dealing with issues unique to their company, such as bloated balance sheets or broken business models.
It might be a while before the market bounces back. In the interim, investors should be aware of the market’s possible value stocks. Even if it is not popular or profitable in the short term, the long-term benefits of investing wisely and deviating from the crowd can be significant, according to the contrarian investing philosophy.
Investing during a market downturn may present chances for sizable returns in the long term. We examine the top 10 blue-chip losers to date and potential opportunities for investors to acquire them.
Image by Nicola Giordano from Pixabay
Our Methodology
To prepare this article, we began by listing all the holdings of the various blue chip ETFs like E.A. Bridgeway Blue Chip ETF, Vanguard Mega Cap ETF, and DOW 30. We then sourced the year-to-date share price returns for each company. Based on these returns, we ranked the companies in descending order.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. 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).
Occidental Petroleum Corporation (NYSE:OXY)
Year to Date Return: -10.16%
Number of Hedge Fund Holders: 62
Occidental Petroleum Corporation (NYSE:OXY) is an energy giant that acquires, explores, and develops oil and gas properties. The company has had a rough go in recent months, resulting in the stock shedding more than 10% in market value, making it one of the worst-performing blue chip stocks in 2024, given that the S&P 500 is up by about 20%.
Oil prices are declining despite strong U.S. demand, and OPEC+’s expanding its production cuts through 2025 has hurt the company’s core business. The entire oil and gas production industry has been negatively impacted by the drop in crude oil prices over the past year, which went from about $90 per barrel to $70 per barrel.
Despite the oil price slump, Occidental Petroleum Corporation (NYSE:OXY) owns roughly 2.8 million net acres of land in the Permian Basin, where it is one of the biggest producers. It recently acquired CrownRock for $12 billion, solidifying its position. The acquisition resulted in a 33% increase in Occidental’s inventory of breakeven locations with prices below $40 per barrel.
Occidental Petroleum Corporation (NYSE:OXY) issued $9.1 billion in new debt and invested $1.2 billion in existing debt to finance most of its CrownRock deal. Its short-term goal is to pay off debt with excess free cash flow. Within a year of closing that deal, the company wants to reduce debt by $4.5 billion by selling assets and using free cash flow. Even as it tries to reduce its huge debt burden, the company still yields 1.63% on dividends.
By the end of Q2 2024, the number of hedge funds with stakes in Occidental Petroleum Corporation (NYSE:OXY) increased to 62, up from 61 in the previous quarter. This modest rise indicates a growing interest in Occidental Petroleum among institutional investors. The total value of these stakes is significant, surpassing $18.50 billion.
Overall OXY ranks 7th on our list of the worst performing blue chip stocks in 2024. While we acknowledge the potential of OXY 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 OXY, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.