In this article, we discuss the top 10 oil and gas stocks to invest in. If you want to skip our detailed analysis of these stocks, go directly to the Top 5 Oil and Gas Stocks to Invest In.
Oil stocks soared in the last week due to higher oil prices. West Texas Intermediate (WTI), one of the global oil benchmarks, rose 3.3% to $72.78 per barrel on September 15 and has risen 90% in the last year. With the ramped-up COVID-19 vaccinations and a gradual lifting of lockdown measures, Wall Street analysts anticipate crude markets have the ability to rise considerably higher in the coming months.
In addition, oil and gas companies are leading to a solid recovery, with oil prices rising more than 45% this year as a result of the ongoing economic recovery and massive production cuts by the Organization of Petroleum Exporting Countries (OPEC) and its non-OPEC allies. Investors see the rise in oil prices as an opportunity to enter and profit from the stock market. Oil giants Exxon Mobil Corporation (NYSE:XOM) and Chevron Corporation (NYSE:CVX) are among the largest oil and gas companies in the world by market capitalization. These oil behemoths are popular among investors.
The continuous oil price hike is supported by the increasing demand for oil and gas globally with travel restrictions slowly easing. According to OPEC’s monthly oil market report released in September, oil demand in 2022 is expected to surpass pre-pandemic levels at 100.8 mb/d, up from the global oil demand average of 96.7 mb/d in 2021.
Among the biggest oil and gas gainers in the recent weeks are EOG Resources, Inc. (NYSE:EOG), Marathon Oil Corporation (NYSE:MRO), Devon Energy Corporation (NYSE:DVN), and Exxon Mobil Corporation (NYSE:XOM). Houston-based oil and gas company EOG Resources, Inc. (NYSE:EOG) climbed 10.59% in the last five days while Marathon Oil Corporation (NSYE: MRO) and Devon Energy Corporation (NYSE:DVN) jumped 6.48% and 6.13%, respectively. On the other hand, shares of Exxon Mobil Corporation (NYSE:XOM) increased 2.18% in the last five days.
Among the oil and gas exchange-traded funds (ETFs) that are gaining traction recently is Energy Select Sector SPDR Fund (NYSEARCA:XLE), which has gained 3.20% in the last five days. Energy Select Sector SPDR Fund’s (NYSEARCA:XLE) holdings include Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), Occidental Petroleum Corporation (NYSE:OXY), Devon Energy Corporation (NYSE:DVN), and Marathon Oil Corporation (NSYE: MRO).
Our Methodology
The stocks on our list were picked based on their fundamentals and prospects for growth based on key business characteristics. We chose oil and gas stocks that have long-term growth prospects and high analyst ratings.
We ranked these stocks based on the number of hedge funds having stakes in them, based on our data of over 873 hedge funds.
Why should we pay attention to hedge fund sentiment while choosing stocks? Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 86 percentage points since March 2017. Between March 2017 and July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by 86 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Let’s now look at the top 10 oil and gas stocks to invest in.
Top Oil and Gas Stocks to Invest In
10. BP p.l.c. (NYSE:BP)
Number of Hedge Fund Holders: 30
We start our list of the top 10 oil and gas stocks to invest in with a London-based energy company BP p.l.c. (NYSE:BP). The company operates in the exploration and production of oil and gas and other petrochemical products. Additionally, BP p.l.c. (NYSE:BP) is involved in renewable energy generation, including solar and wind energy.
On September 16, Deutsche Bank analyst James Hubbard kept a Hold rating on BP p.l.c. (NYSE:BP) and raised his price target for the stock to 320 GBp from 313 GBp. BP plc (NYSE:BP) also announced a strategic partnership with oil and gas company Abu Dhabi National Oil Company (ADNOC) and renewable energy firm Masdar, to deliver sustainable energy solutions for the UK and UAE. Shares of BP plc (NYSE:BP) increased 3.02% in the past five days.
The company has a market cap of $84 billion. In the second quarter of 2021, BP p.l.c. (NYSE:BP) reported an EPS of $0.83, beating estimates by $0.23. The company’s revenue in the second quarter came in at $36.47 billion. The stock has gained 23%, year to date, and 29% in the past twelve months.
BP p.l.c. (NYSE:BP) currently pays an annual dividend of $1.31 per share and has a dividend yield of 5.19%.
At the end of the second quarter of 2021, 30 hedge funds in the database of Insider Monkey held stakes worth $1.08 billion in BP p.l.c. (NYSE:BP), up from 29 in the previous quarter worth $1.24 billion.
Just like Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), Devon Energy Corporation (NYSE:DVN), Marathon Oil Corporation (NSYE: MRO), and EOG Resources, Inc. (NYSE:EOG), BP p.l.c. (NYSE:BP) is a good oil stock to invest in, according to market analysts.
9. Marathon Oil Corporation (NYSE:MRO)
Number of Hedge Fund Holders: 34
Marathon Oil Corporation (NYSE:MRO) is a Houston-based independent exploration and production company and it ranks ninth on the list of top 10 oil and gas stocks to invest in. The company was founded in 1887 and was formerly known as USX Corporation. Marathon Oil Corporation (NYSE:MRO) sells crude oil, natural gas, and natural gas liquids in the US.
On August 6, Scotiabank analyst Paul Cheng upgraded Marathon Oil Corporation (NYSE:MRO) to Outperform from Sector Perform and increased his price target for the stock to $18 from $15 previously. Marathon Oil Corporation (NYSE:MRO) shares have risen 6.48% in the last five days as oil prices have increased due to supply concerns caused by Hurricane Ida damage.
The company has a market cap of $9.4 billion. In the second quarter of 2021, Marathon Oil Corporation (NYSE:MRO) reported an EPS of $0.22, beating estimates by $0.04. The company’s revenue in the second quarter came in at $1.14 billion, up from $272 million in the second quarter of 2020, and beat revenue estimates by $25.77 million. The stock has gained 80%, year to date, and 156% in the past twelve months.
Marathon Oil Corporation (NYSE:MRO) currently pays an annual dividend of $0.20 per share and has a dividend yield of 1.67%.
At the end of the second quarter of 2021, 34 hedge funds in the database of Insider Monkey held stakes worth $655 million in Marathon Oil Corporation (NYSE: MRO), up from 29 in the previous quarter worth $423 million.
8. EOG Resources, Inc. (NYSE:EOG)
Number of Hedge Fund Holders: 35
EOG Resources, Inc. (NYSE:EOG) ranks eighth on the list of top 10 oil and gas stocks to invest in. EOG Resources, Inc. (NYSE:EOG) markets natural gas and crude oil. The Houston-based oil company has established operations in China, Oman, and the Republic of Trinidad and Tobago.
On September 13, Tudor Pickering analyst Matthew Portillo upgraded EOG Resources, Inc. (NYSE:EOG) to Buy from Hold with a price target of $82 per share.
The company has a market cap of $43 billion. In the second quarter of 2021, EOG Resources, Inc. (NYSE:EOG) reported an EPS of $1.73, beating estimates by $0.18. The company’s revenue in the second quarter was $4.14 billion, an increase of 276%year over year, and beat revenue estimates by $454.36 million. The stock has gained 49%, year to date, and 80% in the past twelve months.
EOG Resources, Inc. (NYSE:EOG) currently pays an annual dividend of $1.65 per share and has a dividend yield of 2.22%.
At the end of the second quarter of 2021, 35 hedge funds in the database of Insider Monkey held stakes worth $411 million in EOG Resources, Inc. (NYSE:EOG), up from 30 in the previous quarter worth $596 million.
7. Valero Energy Corporation (NYSE:VLO)
Number of Hedge Fund Holders: 38
Valero Energy Corporation (NYSE:VLO) ranks seventh on the list of top 10 oil and gas stocks to invest in. The Texas-based oil and gas company manufactures and sells transportation fuel and petrochemical products. Valero Energy Corporation (NYSE:VLO) was founded in 1980 as Valero Refining and Marketing Company.
On September 16, Piper Sandler analyst Ryan Todd kept an Overweight rating on Valero Energy Corporation (NYSE:VLO) and set a $75 price target for the stock, noting that amidst a bumpy third quarter, the independent fuel company is well-positioned in the oil and gas market. Shares of Valero Energy Corporation (NYSE:VLO) climbed 3.45% in the past five days.
The company has a market cap of $26.8 billion. In the second quarter of 2021, Valero Energy Corporation (NYSE:VLO) reported an EPS of $0.48, beating estimates by $0.35. The company’s revenue in the second quarter was $27.75 billion, an increase of 166% year over year, and beat revenue estimates by $6 billion. The renewable diesel segment, which reported $248 million in operating income for the second quarter of 2021, compared to $129 million in the second quarter of 2020, was one of the segments that supported Valero Energy Corporation’s (NYSE:VLO) revenue growth in the second quarter. The stock has gained 16%, year to date, and 34% in the past twelve months.
Valero Energy Corporation (NYSE:VLO) is one of the oil and gas companies that offer a high yield of 5.98% and pays its shareholders an annual dividend of $3.92.
At the end of the second quarter of 2021, 38 hedge funds in the database of Insider Monkey held stakes worth $259 million in Valero Energy Corporation (NYSE:VLO).
Along with Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), Devon Energy Corporation (NYSE:DVN), Marathon Oil Corporation (NSYE: MRO), and EOG Resources, Inc. (NYSE:EOG), Valero Energy Corporation (NYSE:VLO) is one of the leading oil and gas companies today.
6. Diamondback Energy, Inc. (NASDAQ:FANG)
Number of Hedge Fund Holders: 38
Diamondback Energy, Inc. (NASDAQ:FANG) ranks sixth on the list of top 10 oil and gas stocks to invest in. Diamondback Energy, Inc. (NASDAQ:FANG) is an independent oil and natural gas company based in Texas. Diamondback Energy, Inc.’s (NASDAQ:FANG) total acreage holding in the Permian Basin as of December 31, 2020 was approximately 449,642 gross acres, with working interests in 4,326 gross producing wells and royalty interests in 4,553 additional wells.
On September 16, Truist analyst Neal Dingmann kept a Buy rating on Diamondback Energy, Inc. (NASDAQ:FANG) and increased his price target for the stock to $130 from $122 previously. The analyst is optimistic about the company’s potential to create significant free cash flows in the fiscal year 2022, with a yield of above 20%. The stock has gained 10.10% in the past five days.
Shares of Diamondback Energy, Inc. (NASDAQ:FANG) climbed 4% pre-market on September 17 following the announcement of a $2 billion stock buyback program as it accelerates plans to return 50% of free cash flow to shareholders to Q4.
The company has a market cap of $15 billion. In the second quarter of 2021, Diamondback Energy, Inc. (NASDAQ:FANG) reported an EPS of $2.40, beating estimates by $0.20. The company’s revenue in the second quarter was $1.68 billion, up from $425 million in the second quarter of 2020, and beat revenue estimates by $350 million.
Diamondback Energy, Inc. (NASDAQ:FANG) recently increased its annual dividend by 12.5% to $1.80 per share. The company offers a dividend yield of 2.3%.
At the end of the second quarter of 2021, 38 hedge funds in the database of Insider Monkey held stakes worth $443 million in Diamondback Energy, Inc. (NASDAQ:FANG), up from 35 in the previous quarter worth $343 million.
Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), Devon Energy Corporation (NYSE:DVN), Marathon Oil Corporation (NSYE: MRO), EOG Resources, Inc. (NYSE:EOG), and Diamondback Energy, Inc. (NASDAQ:FANG) are some of the most popular oil and gas stocks favored by market analysts today.
Miller Value Partners, in their Q4 2020 Investor Letter, said Diamondback Energy, Inc. (NASDAQ:FANG) was added to their portfolio in the fourth quarter of 2020. Here is what the fund said:
“We also bought Diamondback Energy. For the first time in decades, we find the energy to be quite attractive. Companies are finally focusing on cash flow and returns. Diamondback is a low-cost shale producer that screened well on a number of metrics we pay attention to (dividend yield, free cash flow yield, discounted cash flow, and insider buying). They recently added ROIC to their management incentive compensation. They plan to continue to pay down debt and maintain the dividend. The company is obviously levered to increasing oil prices.”
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Disclosure: None. Top 10 Oil and Gas Stocks to Invest In is originally published on Insider Monkey.
