We recently published a list of 10 Best Undervalued Energy Stocks To Buy According to Hedge Funds. In this article, we are going to look at where ConocoPhillips (NYSE:COP) stands against other best undervalued energy stocks to buy according to hedge funds.
Despite the stated goal of energy dominance, the US has already achieved significant milestones in energy production. For six consecutive years, the US has led the world in oil production and was one of the largest exporters of natural gas in 2023. The Trump administration aims to further strengthen the position of the US in global oil and gas markets, challenging OPEC and other major producers.
To achieve this growth, the American Petroleum Institute (API), the association of oil and natural gas industry trade, has urged Trump to implement a five-point plan that includes authorizing additional liquefied natural gas (LNG) exports, expanding drilling on federal lands, easing pipeline permitting, repealing stringent vehicle emissions and fuel economy standards, and preserving current corporate tax rates. According to CNBC, Trump has indicated plans to sign executive orders related to energy policy upon taking office on January 20. He is also establishing a National Energy Council, which aims to reduce regulatory barriers and advance US energy dominance.
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US Oil Producers and the Challenge of Lower Oil Prices
In an interview with CNBC on December 5, Helima Croft, Managing Director and Global Head of Commodity Strategy at RBC Capital Markets, discussed that while President Trump and his administration have been vocal about their desire for lower oil prices, this poses significant challenges for the US oil producers because they are already operating in a highly competitive environment. The equilibrium price that balances the interests of businesses and consumers is a critical question, as producers do not want to drill themselves out of business. Croft explained that there is a collective production cut agreement between OPEC countries running through the end of 2025. In addition to the collective production cut, there is a voluntary cut by eight producers that has been phased slowly. The current expectation was that these producers would maintain this stance due to sanctions and a less optimistic demand outlook.
Croft acknowledged that geopolitical tensions particularly in the Middle East play a role in influencing market sentiment. However, she emphasized that the biggest issue right now is from the demand side, due to the impact of possible tariffs on China. Weak Chinese demand has been a problem for the oil market this year, and the potential implications of tariffs will be closely watched as they could further affect demand.
The US has achieved significant milestones in energy production in recent years and the Trump administration plans to further strengthen it in the global oil and gas markets.
Our Methodology
To compile our list of the 10 best undervalued energy stocks to buy according to hedge funds, we used Finviz and Yahoo stock screeners to find the 25 largest energy companies trading below a forward P/E ratio of 15, as of December 16. We then used Insider Monkey’s Hedge Fund database to rank 10 stocks according to the largest number of hedge fund holders, as of Q3 2024. The list is sorted in ascending order of hedge fund sentiment.
Why do we care about what hedge funds do? 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).
ConocoPhillips (NYSE:COP)
Number of Hedge Fund Investors: 66
Forward P/E Ratio as of December 16: 10.99
ConocoPhillips (NYSE:COP) is a global independent oil and natural gas exploration and production company. The company operates in prolific basins, including the Permian, Bakken, and Eagle Ford in the U.S., as well as in international markets. ConocoPhillips (NYSE:COP) earns revenue by selling its hydrocarbons to global markets.
ConocoPhillips (NYSE:COP) is expanding its presence in the liquefied natural gas (LNG) market to capitalize on growing global demand. The company has made significant investments in LNG projects, including the APLNG and Port Arthur LNG facilities, and is actively working to secure long-term supply contracts in key markets such as Europe and Asia. In Q3, ConocoPhillips (NYSE:COP) executed three new agreements in Europe, representing about 1.8 million tons per annum (MTPA) of capacity, which will enable the company to place volumes more efficiently into multiple European markets. ConocoPhillips (NYSE:COP) remains bullish on long-term demand growth and is positioning itself to capture value from premium gas markets.
ConocoPhillips (NYSE:COP) is maintaining a disciplined approach to capital spending, with a focus on projects that offer strong returns and competitive cost structures. For 2025, the company expects to grow production at a low-single-digit rate with a pro-forma capital expenditure (CapEx) of less than $13 billion. Key projects include the Willow development in Alaska, the Port Arthur LNG project, and the Callaway expansion. These projects are expected to contribute to the company’s production growth and enhance its position in premium markets. Additionally, the company is actively managing its portfolio through asset dispositions, targeting $2 billion in non-core asset sales over the next several years to further optimize its asset base and redeploy capital to higher-return opportunities.
Overall, COP ranks 3rd on our list of best undervalued energy stocks to buy according to hedge funds. While we acknowledge the potential of COP to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than COP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
