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 Permian Resources Corporation (NYSE:PR) 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.
READ ALSO: 12 Stocks Most Held by Hedge Funds and 11 Best Freight Stocks To Buy Now.
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).
Permian Resources Corporation (NYSE:PR)
Number of Hedge Fund Investors: 56
Forward P/E Ratio as of December 16: 10.60
Permian Resources Corporation (NYSE:PR) specializes in oil and gas exploration and production in the Permian Basin, one of the most productive energy regions in the United States. The company’s customer base includes refiners, industrial users, and utility companies. Permian Resources Corporation (NYSE:PR) focuses on horizontal drilling and advanced completion techniques to maximize well performance.
Permian Resources Corporation (NYSE:PR) continues to drive operational efficiencies and cost reductions, which are central to its growth strategy. In Q3, the company achieved record drilling times and increased pumping hours per day, which led to a 15% reduction in cost per foot, translating to over $1 million in savings per well. Permian Resources Corporation (NYSE:PR) has also been proactive in expanding its asset base through strategic acquisitions. In Q3, the company successfully closed the Barilla Draw acquisition, which will add 9,900 net royalty acres to the company’s footprint in the Permian Basin and is expected to increase production by about 15,000 barrels of oil equivalent per day.
Permian Resources Corporation (NYSE:PR) is also one of the largest natural gas producers in the Permian Basin, producing approximately 600 million cubic feet of residue gas per day. The company is actively exploring ways to maximize the value of its natural gas production, including increasing the volume of gas sold at the Gulf Coast, which currently stands at about 50% of total gas sales. The company is also exploring the use of natural gas for power operations, recognizing the potential demand implications of increasing power demand, particularly in the Permian Basin.
Overall, PR ranks 6th on our list of best undervalued energy stocks to buy according to hedge funds. While we acknowledge the potential of PR 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 PR 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.
