In this article, we will take a look at the top 5 oil and gas stocks to invest in. For a detailed analysis of the oil and gas industry, go directly to the Top 10 Oil and Gas Stocks to Invest In.
5. Pioneer Natural Resources (NYSE:PXD)
No of Hedge Fund Holders: 40
Total Value of Hedge Fund Holdings: $685 Million
Ranking 5th on the list of top 10 oil and gas stocks to invest in is Pioneer Natural Resources. The Irving, Texas-based hydrocarbon exploration company operates the largest acreage in the Cline Shale. This month, the company acquired leasehold rights and associated properties of DoublePoint Energy (DoublePoint) in a deal valued at approximately $6.4 billion. The agreement also entails the shouldering of around $900 million in DoublePoint Energy’s debt and liabilities.
The company has a market cap of $31.6 billion and a revenue of $6.7 billion in 2020. Shares of PXD surged 98% over the past twelve months. Hedge fund interest in Pioneer Natural Resources fell at the end of last quarter. The number of long hedge fund bets declined by one lately. Mattel, Inc. was in 40 hedge funds’ portfolios at the end of the fourth quarter of 2020 compared to 42 positions in the previous quarter.
4. Marathon Petroleum Corporation (NYSE:MPC)
No of Hedge Fund Holders: 43
Total Value of Hedge Fund Holdings: $1.88 Billion
Marathon Petroleum Corporation ranks 4th on the list of top 10 oil and gas stocks to invest in. The petroleum refining and transportation company has over 16 refineries with over 3 million barrels per day capacity. The company recently rebranded their Martinez refinery to Martinez Green Fuels, a renewable fuels manufacturing, and terminal facility that can produce 730 million gallons of renewable fuels annually.
On April 16, Marathon Petroleum traded higher after Raymond James upgraded it from Market Perform to Strong Buy and set a price target of $69 per share. The company has a market cap of $33.9 billion and total revenue of $2.6 billion in 2020. Shares of Marathon Petroleum Corporation increased 119% over the past twelve months. There were 43 hedge funds that reported owning stakes in MPC at the end of the fourth quarter, down from 56 funds a quarter earlier. The total value of these stakes at the end of Q4 is $1.88 billion.
First Eagle Investment Management mentioned that Marathon Petroleum was dragged down by widespread weakness in the energy sector, especially in global refining markets and crack spreads in its Q1 2020 investor letter:
“Pervasive weakness across the energy sector, and in global refining markets and crack spreads specifically, pulled down Marathon Petroleum during the quarter. The stock was further hurt by early-March news that Japanese retailer Seven & i Holdings was scrapping plans to acquire Marathon’s Speedway gas station/convenience stores for $22 billion.”
3. Devon Energy Corporation (NYSE:DVN)
No of Hedge Fund Holders: 45
Total Value of Hedge Fund Holdings: $709 Million
Energy giant Devon Energy Corporation ranks 3rd on the list of top 10 oil and gas stocks to invest in. Headquartered in Oklahoma City, Oklahoma, Devon Energy Corporation is engaged in hydrocarbon exploration in the American market. In 2020, the company acquired WPX Energy, a company engaged in hydrocarbon exploration in a $2.56 billion deal.
In March, the Goldman Sachs Group gave DVN a Buy recommendation and a $30.75 price target. According to Goldman Sachs Group’s price target, the stock could rise 35.22% from its current price. The company has a market cap of $14.1 billion and a full-year 2020 revenue of $4.8 billion. Shares of DVN surged 131% over the last twelve months. At the end of the fourth quarter, there were 45 hedge funds that reported owning stakes in Devon Energy Corporation, down from 44 funds a quarter earlier. The total value of these stakes at the end of Q4 is $709 million.
GoodHaven Capital Management mentioned that the merger with WPX would give the company enough cash flow with a more economical price in its Q4 2020 investor letter:
“After a rough start to the year our two biggest energy holdings – WPX Energy rebounded materially in the last six months though energy was still our biggest detractor for the year. I’ve previously written about deciding earlier this year to direct new capital towards better businesses versus adding more to the energy sector, but given the material optionality at WPX, we opted to maintain a material exposure. Recently WPX announced an all stock merger with a larger competitor – Devon Energy – which will leave the new company with plenty of cash flow at lower oil prices, less leverage, and material upside to higher commodity prices.”
2. EOG Resources, Inc. (NYSE:EOG)
No of Hedge Fund Holders: 45
Total Value of Hedge Fund Holdings: $750 Million
Securing the 2nd spot on the list of 10 oil and gas stocks to invest in is EOG Resources, Inc. Headquartered in Houston, Texas, EOG Resources, Inc. is one of the leading energy companies with 47,000 net acres in the Horn River Formation. The company recently reported prospects for natural gas gold in South Texas while concentrating on ‘double premium oil wells in the Lower 48. According to the company, the claim may be a surefire way for EOG to sustain its natural gas industry credentials.
On April 20, Mizuho analyst maintained EOG Resources as a Buy with a $92 price target. The company has a market cap of $40.0 billion. The company’s revenue in full-year 2020 came in at $11.03 billion. The stock has gained 63% in the last twelve months. Overall, hedge fund sentiment increased significantly for the company. The stock was in 46 hedge funds’ portfolios at the end of December compared to 36 in the previous quarter.
1. ConocoPhillips (NYSE:COP)
No of Hegde Fund Holders: 49
Total Value of Hedge Fund Holdings: $687 Million
Topping the list of 10 oil and gas stocks to invest in is ConocoPhillips. Based in Houston, Texas, the hydrocarbon exploration company owns approximately 1.6 million net acres in the Lower 48. In 2020, the company confirmed a new gas condensate discovery in development license 1009, situated in the Norwegian Sea 22 miles northwest of the Heidrun Field and 150 miles from Norway’s coast.
In April, Keybanc kept its Overweight rating on ConocoPhillips and raised its price target to $63 a share. The company has a market cap of $65.7 billion and full-year revenue of $18.8 billion in 2020. The stock has gained 46% over the past twelve months. COP was in 49 hedge funds’ portfolios at the end of December, up from four hedge funds from the third quarter.
Oakmark Funds mentioned that ConocoPhillips is one of the world’s best independent oil companies today in its Q1 2021 investor letter:
“We elected to retain a position in ConocoPhillips following its all-stock acquisition of portfolio holding Concho Resources after determining that the combined entity was nearly as undervalued as stand-alone Concho. We believe Conoco is one of the highest quality independent oil producers in the world today. The company has decades of low-cost drilling inventory in attractive oil basins, minimal leverage and industry-leading returns on invested capital. Conoco management has built this enviable competitive position through years of shrewd capital allocation and efficient operations. This includes a history of accretive divestitures and opportunistic acquisitions, the latest example being Concho. For Conoco, the Concho deal adds some of the highest quality acreage in the Permian Basin at an attractive all-in cost, with an opportunity to create incremental value by eliminating duplicative costs and monetizing excess acreage. We believe this value-focused approach to both acquisitions and divestitures is rare in oil and gas and we are pleased to invest alongside these stewards of capital. The shares are priced at a double-digit free cash flow yield and a discount to peers on most earnings metrics, so we took advantage of the opportunity to own the business at an attractive price.”
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