In this article, we will take a detailed look at Republicans are Buying These 10 Oil and Gas Stocks. For a quick overview of such stocks, read our article Republicans are Buying These 5 Oil and Gas Stocks.
Energy stocks are in the limelight this year amid geopolitical tensions in the Middle East and recession fears. The performance of oil stocks so far has exceeded expectations this year, driven by supply cuts and a jump in oil price. Earlier this month, oil price inched up after OPEC and its allies decided to keep the existing output cuts through the end of June.
Energy Stocks “Roared Back Like a Lion”
Roth analyst Leo Mariani, while recently talking to Bloomberg, said that most investors were not expecting “anything out of energy” in 2024 but energy stocks “roared back like a lion.”
A Bloomberg report earlier this month cited brokerage data from Goldman Sachs which shows that hedge funds were selling off oil and gas stocks to pile into crude oil. But that doesn’t mean oil and gas stocks are falling out of favor with institutional investors. In fact, energy stocks are shining this year as the broader market looks beyond technology stocks and pile into other sectors. The S&P 500 Energy is up about 15% year to date through April 26, while the S&P 500 Information Technology is up just 6%. Energy Select Sector SPDR Fund (NYSEARCA:XLE), whose top holdings include Exxon Mobil Corp (NYSE:XOM), Chevron Corp (NYSE:CVX) and ConocoPhillips (NYSE:COP), is up about 13% year to date. The Bloomberg report highlighted that both Goldman Sachs and Morgan Stanley upgraded the sector, citing attractive valuations, earnings revisions and rising oil prices.
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Industry Analysts Bullish on Oil and Gas Stocks
The report also quoted Walter Todd, chief investment officer at Greenwood Capital Associates, who said that oil stocks have followed a “boom and bust” cycle in which supply-demand dynamics are always at play. But now, the analyst believes, oil companies in the US have become disciplined when it comes to capital. Todd believes oil stocks are “inexpensive” when compared to the market. Morgan Stanley’s Mike Wilson in March said that energy stocks were cheap when compared to the S&P 500. He said that with higher free cash flow yields, he was expecting “further outperformance” for these companies.
Talking to Bloomberg, Daan Struyven, Goldman Sachs head of Oil Research, said that in case there are no “geopolitical hits” to oil supply, $90 per barrel could be the “ceiling” for Brent crude this year. The analyst noted that over the past two years supply of oil from Iran has jumped about 20%. He thinks that the market is current pricing in the risks of supply hits to Iranian oil in case of geopolitical escalation, possible sanctions and foreign policy changes in the US.
Focus on Small Oil and Gas Companies
Oil giants Exxon Mobil Corp (NYSE:XOM) and Chevron Corp (NYSE:CVX) recently posted their Q1 results, which were lower than expected amid slim margins on refining and plunging natural gas prices. But some analysts were already expecting lackluster earnings from major oil and gas companies; they were betting on smaller players. For example, earlier this month, Cole Smead, president of Smead Capital Management, while talking to Bloomberg, had said he was betting on smaller energy companies like Apa Corp., Ovintiv Inc., MEG Energy Corp. and Strathcona Resources Ltd.
Pixabay/Public Domain
Oil refiners are also in the limelight this year, with the VanEck Oil Refiners ETF (NYSEARCA:CRAK) up 10% so far this year, and up 22% over the past one year.
Methodology
Republicans are famous for their liking for oil and gas stocks. It’s always interesting to see stock trades of American politicians, and with the US election coming up this year, we decided to see which energy stocks Republicans are piling into. We scoured publicly available data and filings to find oil and gas stocks that saw buying from Republican Congress members and Senators over the past few months. Why is it important to see what Washington insiders, corporate executives and hedge funds are buying? Insider Monkey’s monthly newsletter and portfolio that focuses on activist hedge funds, insider trading and stock picks from hedge fund investor newsletters and conferences returned 199.2% between March 2017 and March 12, 2024 and outperformed the S&P 500 ETFs’ 144.9% gain by more than 54 percentage points.
10. Alliance Resource Partners, L.P. (NASDAQ:ARLP)
Number of Hedge Fund Investors: 6
Ranking 10th in our list of the energy stocks Republicans are buying in 2024 is Alliance Resource Partners, L.P. (NASDAQ:ARLP). Republican Congresswoman Virginia Foxx on February 23 bought a stake worth between $1,000 to $15,000 in Alliance Resource Partners, L.P. (NASDAQ:ARLP). Since then through April 24 the stock has gained about 11%. Primarily a coal company, Alliance Resource also makes money from oil and gas royalties. During its earnings Q4’2023 earnings call the company talked about oil and gas royalty income guidance:
“In our oil and gas royalty segment, we expect sales of 1.4 million to 1.5 million barrels of oil, 5.6 million to 6 million Mcf of natural gas, and 675,000 to 725,000 barrels of liquid. Segment adjusted EBITDA expense is expected to be approximately 12% of oil and gas royalties revenues for the year. In 2024, we are anticipating $450 million to $500 million in total capital expenditures. Consistent with messaging in recent quarters, 2023 and 2024 are years of elevated capital expenditures as we make long-term strategic investments in our River View, Warrior, Hamilton, and Tunnel Ridge mines to ensure they remain reliable low-cost operations for many years to come. Starting in 2025, we anticipate our capital expenditures to return to more normalized levels of $6.75 to $7.75 per ton produced.
Additionally, we remain committed to investing in our oil and gas minerals business, the amount of which will be dependent upon the opportunities available that meet our underwriting standards. Next, we remain focused on continuing to improve our balance sheet, maintaining flexibility and strong liquidity. We expect to retire the $285 million outstanding on our senior notes periodically throughout the balance of 2024 using a combination of operating cash flows and a number of attractive financing options currently available to us, including increases to our existing facilities, equipment financing, and utilizing the collateral value of our high quality and unencumbered royalty assets, all of which are at various stages of execution today.”
Read the full earnings call transcript here.
9. Ardmore Shipping Corp (NYSE:ASC)
Number of Hedge Fund Investors: 16
Chemical tankers company Ardmore Shipping Corp (NYSE:ASC) ranks ninth in our list of the top oil and gas stocks Republicans are buying. Congresswoman Virginia Foxx on March 4 bought a stake worth between $1,000 to $15,000 in Ardmore Shipping Corp (NYSE:ASC). Since this transaction, the stock has gained about 5%.
8. ONEOK Inc (NYSE:OKE)
Number of Hedge Fund Investors: 27
Natural gas company ONEOK Inc (NYSE:OKE) ranks eighth in our list of the oil and gas stocks Republicans are piling into.
Congressman Kevin Hern on February 14 bought a stake worth between $1,000 to $15,000 in ONEOK Inc (NYSE:OKE). Since then the stock has gained about 18% in value.
Hedge funds also like OKE since 27 funds reported owning stakes in the company. They are also buying Exxon Mobil Corp (NYSE:XOM), Chevron Corp (NYSE:CVX) and ConocoPhillips (NYSE:COP).
7. Williams Companies Inc (NYSE:WMB)
Number of Hedge Fund Investors: 36
Williams Companies Inc (NYSE:WMB) is another stock in the portfolio of Republican Congressman Kevin Hern, since he bought a stake worth between $1,000 to $15,000 in the Tulsa, Oklahoma-based natural gas processing and transportation company on March 25. He bought this stake at $38.21 per share. Since then through April 24 Williams Companies Inc (NYSE:WMB) shares have gained about 2.5%.
6. Shell PLC (NYSE:SHEL)
Number of Hedge Fund Investors: 46
Republican Congressman Michael McCaul on March 20 bought a stake in Shell PLC (NYSE:SHEL) worth between $50,000 to $100,000. Since this transaction Shell PLC (NYSE:SHEL) shares have gained about 9%. In addition to Shell, hedge funds also like Exxon Mobil Corp (NYSE:XOM), Chevron Corp (NYSE:CVX) and ConocoPhillips (NYSE:COP).
As of the end of the fourth quarter of 2023, 46 hedge funds tracked by Insider Monkey had stakes in Shell PLC (NYSE:SHEL). The biggest stakeholder of Shell PLC (NYSE:SHEL)during this period was Ken Fisher’s Fisher Asset Management which owns a $1.5 billion stake in Shell PLC (NYSE:SHEL).
Click to continue reading and see Republicans are Buying These 5 Oil and Gas Stocks.
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Disclosure. None. Republicans are Buying These 10 Oil and Gas Stocks was initially published on Insider Monkey.