We recently compiled a list of the 10 Best American Energy Stocks To Buy According to Hedge Funds. In this article, we are going to take a look at where Chevron Corporation (NYSE:CVX) stands against the other American energy stocks.
The energy industry includes stocks that are involved in the production or supply of energy. Companies engaged in oil and gas drilling, refining, and discovering and developing oil or gas reserves are all part of the energy sector or industry. The energy industry also comprises integrated power utility companies that use renewable energy and coal.
Energy companies continue to suffer challenges as oil supply exceeds demand. Oil prices have been below $70/barrel since early September. According to U.S. Bank Asset Management’s senior investment strategy director, Rob Haworth:
“The oil market is one that remains well supplied but isn’t well demanded.” Although the U.S. economy is strong, other major oil users like China and Germany are experiencing economic challenges. As a result, global demand is lagging.”
Nonetheless, a number of energy companies have made encouraging achievements in 2024, and investors have reaped financial rewards as the energy sector of the broader market has grown by 12.74% since the start of the year. Based on exceptional results in 2021 and 2022, it has increased by 19.89% in just three years and by 10.61% growth over the previous five years.
However, according to RSM’s Energy Outlook 2024 report, the North American energy sector will confront significant potential problems due to a global move toward renewable energy sources, aging infrastructure, and rising electricity consumption. Infrastructure limitations continue to be a major obstacle. Scalability concerns have been brought to light by record U.S. oil and natural gas output as well as a boom in renewable energy, affecting projects like solar farms in California and drilling in Texas. These challenges show how urgently infrastructure modernization investments are needed.
As per the aforementioned report, North America’s demand for electricity has increased to levels not seen in many years. Emerging technologies like green hydrogen, the use of electric vehicles, and growing data centers are important drivers. The use of machine learning and other analytical AI technology is growing among energy companies. This change alters the energy sector and aligns with tax incentives and the company’s environmental, social, and governance goals. Most importantly, integrating clean energy is essential as companies adjust to meet rising demand sustainably.
According to BloombergNEF, $303 billion was spent on U.S. renewable energy in 2023, a 22% increase from the year before, showing the continued pace of the energy transformation. Globally, $1.77 trillion was invested, signifying a strong push toward decarbonization. Even though renewable energy requires more cash, companies of all sizes—from startups to established oil and gas companies—are shifting their focus to renewables as the case for clean energy grows. This change sets up the energy industry for a significant and sustainable future.
Methodology:
We sifted through holdings of Energy ETFs and online rankings to form an initial list of 20 American Energy stocks. Then we selected the 10 stocks that were the most popular among institutional investors. The stocks are ranked in ascending order based on the number of hedge funds that have stakes in them, as per Insider Monkey’s database of Q3 2024. We have used the stock’s market cap as of November 21, 2024, as a tie-breaker in case two or more stocks have the same number of hedge funds invested.
Why are we interested in 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)
An aerial view of an oil rig at sea, the sun glinting off its structure.
Chevron Corporation (NYSE:CVX)
Number of Hedge Fund Investors: 63
Chevron Corporation (NYSE:CVX) is a global energy business that engages in exploration, production, and refining. It produces 3.1 million barrels of oil equivalent per day, which includes 1.8 million barrels of liquids and 7.7 million cubic feet of natural gas per day, making it the second-largest oil company in the United States. Production occurs throughout Europe, Africa, Asia, Australia, South America, and North America. It can refine 1.8 million barrels of oil per day at its refineries in the US and Asia. At the end of 2023, proven reserves were 11.1 billion barrels of oil equivalent, which included 30.4 trillion cubic feet of natural gas and 6.0 billion barrels of liquids. CVX has surged by over 8% since the start of 2024, coming through as one of the best American stocks to buy.
Despite a decline from the previous year, Chevron Corporation (NYSE:CVX)’s third-quarter adjusted earnings were above market forecasts. The Permian Basin’s record output propelled the company’s 7% YoY growth in net oil-equivalent production. The company also started production on significant Gulf of Mexico projects in the United States. It announced a $6.5 billion Canadian asset sale and repurchased $4.7 billion worth of shares during the quarter. By the end of 2026, the company intends to cut structural expenses by $2-3 billion.
On November 4, 2024, RBC Capital raised Chevron Corporation’s (NYSE:CVX) price target to $175 from $170, maintaining an Outperform rating on the stock. Although there is still uncertainty surrounding the Hess (HES) deal, the company’s remarks regarding peak Permian capex in 2024 should bode well for free cash flow into 2025 and beyond, the analyst tells investors in a research note. Its Q3 results included a strong operational performance that culminated in an earnings and cash flow beat relative to market expectations.
Warren Buffett’s Berkshire Hathaway was the largest stakeholder in the company from among the funds in Insider Monkey’s database. It owns 118,610,534 shares worth $17.47 billion as of Q3.
Overall CVX ranks 5th on our list of the best American energy stocks to buy. While we acknowledge the potential for CVX as an investment, our conviction lies in the belief that some 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 CVX 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.