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 ConocoPhillips (NYSE:COP) 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 underground network of pipelines transporting oil through an expansive terrain.
ConocoPhillips (NYSE:COP)
Number of Hedge Fund Holders: 66
ConocoPhillips (NYSE:COP) is an independent exploration and production company headquartered in the United States. ConocoPhillips has set up a 10-year plan for constrained investment, steady development, improved returns, and, most crucially, cash distributions to shareholders, distinguishing itself from larger and smaller competitors. Conoco’s strategy, which includes a defined policy on cash return to shareholders and a commitment to capital restraint, makes it an attractive choice in the energy sector. Its excellent financial position protects the dividend in a downcycle, and its low-cost portfolio offers it high-return investment choices to grow in a rising price environment.
In Q3 of 2024, the operating activities generated $5.8 billion in cash, with cash from operations amounting to $4.7 billion. The ordinary dividend was raised by 34% to $0.78 per share, while the authorization to repurchase existing shares was expanded to $20 billion.
On November 22, 2024, ConocoPhillips (NYSE:COP) finalized the acquisition of Marathon Oil Corporation (NYSE: MRO), which improved long-term growth prospects. Over the course of the next 12 months, the company anticipates generating synergies of more than $1 billion on a run-rate basis.
Susquehanna analyst Biju Perincheril maintained a positive recommendation on ConocoPhillips (NYSE:COP) and increased the price target to $148 from $144 on November 1, 2024. Strong L-48 performance drove the company’s Q3 results, which included a beat in both output and EPS. The firm raised its synergy target for the MRO purchase to $1 billion from $500 million before, driven by a $500 million reduction in capex for the combined company as it requires fewer rigs and frac crews to meet its low-single-digit growth aim.
Boykin Curry’s Eagle Capital Management was the largest stakeholder in the company from among the funds in Insider Monkey’s database. It owns 15,214,281 shares worth $1.60 billion as of Q3.
Overall COP ranks 3rd on our list of the best American energy stocks to buy. While we acknowledge the potential for COP 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 COP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.
