Five Best Oil Stocks to Buy Now

After having been range-bound for more than three months, crude futures have recently shown substantial volatility, having fallen below the pivotal $50 per barrel mark. While bears worry that shale is just too cost competitive, many bulls latch on to the belief that Saudi Arabia has strong incentive to ensure steady and relatively robust oil prices for the upcoming Saudi Aramco IPO in 2017. In addition, strong domestic economic growth along with the Trump administration’s less emphasis on fuel efficient vehicles could help boost crude demand beyond current estimates.

Given that hedge funds have done a lot of research in the sector and count Wall Street’s best and brightest as employees, let’s take a look at some of the smart money’s favorite names in the oil patch, Anadarko Petroleum Corporation (NYSE:APC), Halliburton Company (NYSE:HAL), Pioneer Natural Resources (NYSE:PXD), Marathon Petroleum Corp (NYSE:MPC), and Exxon Mobil Corporation (NYSE:XOM) according to fourth quarter 13F filings.

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#5 Exxon Mobil Corporation (NYSE:XOM)
– Number of Hedge Fund Holders (as of December 31): 60
– Total Value of Hedge Fund Holdings (as of December 31): $2.88 billion
– Hedge Fund Holdings as Percent of Float (as of December 31): 0.80%

Of the 742 elite funds we track, 60 funds owned $2.88 billion of Exxon Mobil Corporation (NYSE:XOM) and accounted for 0.80% of the float on December 31, up from 59 funds and $2.83 billion respectively on September 30. After having trended lower due to a disappointing earnings report, Exxon has found a near-term bottom at around the $80 per share mark. Although Exxon still isn’t cheap, its dividend of around 3.66% at current prices is as safe as it gets in the oil patch. Many bulls hope that Exxon will eventually do business again in Russia, a country with substantial oil reserves. If that happens, Exxon would look cheaper based on price-to-reserves and its stock could receive a lift.

#4 Marathon Petroleum Corp (NYSE:MPC)

– Number of Hedge Fund Holders (as of December 31): 60
– Total Value of Hedge Fund Holdings (as of December 31): $3.65 billion
– Hedge Fund Holdings as Percent of Float (as of December 31): 13.70%

If oil prices drop, refiners such as Marathon Petroleum Corp (NYSE:MPC) could benefit due to cheaper input costs. In addition, potentially less regulation in the industry and a less powerful EPA could boost margins. Given all the positives, it’s not surprising that Marathon Petroleum has rallied strongly from early November and that 60 top funds reported owning shares of the company at the end of Q4, up from 53 at the end of Q3.

#3 Pioneer Natural Resources (NYSE:PXD)

– Number of Hedge Fund Holders (as of December 31): 61
– Total Value of Hedge Fund Holdings (as of December 31): $3.11 billion
– Hedge Fund Holdings as Percent of Float (as of December 31): 10.20%

Count Arun Jayaram of JPMorgan as one of the Pioneer Natural Resources (NYSE:PXD) bulls. Jayaram has a $220 price target, up from the previous $196, citing Pioneer’s ‘powerful case for long-term value creation’ due to its anticipated strong production growth. Although lower crude prices could affect Pioneer in the short term, the company’s long term future still looks promising given its huge reserves and relatively competitive production costs. 61 elite funds were long Pioneer Natural Resources (NYSE:PXD) at the end of the fourth quarter, down 11 funds from the previous quarter.

#2 Halliburton Company (NYSE:HAL)

– Number of Hedge Fund Holders (as of December 31): 62
– Total Value of Hedge Fund Holdings (as of December 31): $2.31 billion
– Hedge Fund Holdings as Percent of Float (as of December 31): 4.90%

Although it didn’t successfully merge with Baker Hughes, Halliburton Company (NYSE:HAL) is still intent on expanding. According to the Norwegian paper Finansavisen, Halliburton is currently in advanced talks to buy part or all of Aker Solutions. If the deal goes through at a reasonable valuation, Halliburton management could deliver shareholder value by realizing synergies. The smart money likes the company. According to our data, the number of elite funds with holdings in Halliburton Company (NYSE:HAL) rose by 6 quarter-over-quarter to 62 at the end of December.

#1 Anadarko Petroleum Corporation (NYSE:APC)

– Number of Hedge Fund Holders (as of December 31): 64
– Total Value of Hedge Fund Holdings (as of December 31): $2.99 billion
– Hedge Fund Holdings as Percent of Float (as of December 31): 7.70%

With 64 elite funds reporting long stakes at the end of Q4, Anadarko Petroleum Corporation (NYSE:APC) is the smart money’s favorite energy stock on our list. Although shares of the stock have pulled back from their 2017 highs, analyst Charles Robertson of Cowen would be a buyer on weakness. Robertson believes management’s guidance is conservative and that the company’s joint venture with Shell Delaware could pay off. He has a $86 price target and an ‘Outperform’ rating.

Disclosure:None