In this article, we discuss the 10 best gas stocks to buy now.
Natural gas has been the biggest source of power generation in the United States since 2015. The US is the leading producer of natural gas in the world, however, the country has the fifth-largest reserves of natural gas, after Russia, Iran, Qatar, and Turkmenistan.
The oil and gas industry suffered globally as a result of the COVID-19 pandemic and the resultant economic downturn. With lockdowns in place worldwide, many factories, malls, storefronts, and tourist attractions were shut down for months, which meant power consumption fell drastically, and so did the demand for oil and natural gas. The US gas industry suffered tremendously, with a gross output of $245.8 billion in 2020, down from $375.2 billion in 2019.
However, the industry is set for a rebound as widespread vaccine rollout has steered the country towards gradual but assured economic recovery. The US natural gas inventory levels are below the five-year average, and the rising demand has resulted in soaring gas prices, not just in the US, but worldwide. The gas spot price at Henry Hub in September averaged $5.16 per million British thermal units, up from $3.25 per million British thermal units in the first half of 2021. Winter temperatures, paired with low inventory of natural gas in the US and Europe storage facilities, will result in volatile gas prices over the upcoming months. Natural gas inventories in the US as of September are roughly 3.3 trillion cubic feet, which is 5% less than the recent five-year average for this time of the year.
Increasing natural gas prices cause ripple effects on electricity generation, pushing prices up and driving coal and oil to be the preferred fuel substitutes, thus also resulting in higher levels of carbon dioxide emissions and local pollution.
With the rising demand for oil and gas, hedge funds are extremely invested in these stocks currently. Some of the best stocks as of the end of the second quarter are ConocoPhillips (NYSE:COP), Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and Devon Energy Corporation (NYSE:DVN), among others discussed extensively below.
Photo by Luis Ramirez on Unsplash
Our Methodology
Let’s dive into the 10 best gas stocks to buy now.
We chose the most popular gas stocks among the 873 hedge funds tracked by Insider Monkey as of the second quarter.
Why should we pay attention to hedge fund sentiment while choosing stocks?
Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 86 percentage points since March 2017. Between March 2017 and July 2021, our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the S&P 500 ETF (SPY). Our stock picks outperformed the market by more than 86 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Best Gas Stocks to Buy Now
10. Ovintiv Inc. (NYSE:OVV)
Number of Hedge Fund Holders: 40
Ovintiv Inc. (NYSE:OVV) was previously a Canadian company, headquartered in Alberta, and known as Encana Corporation. The hydrocarbon exploration company rebranded as Ovintiv Inc. (NYSE:OVV) in 2019-20, and shifted to the United States. The company specializes in petroleum, natural gas, and natural gas liquids. Ovintiv Inc. (NYSE:OVV) prides itself on using the best tech, innovation, a multi-basin portfolio, and top tier talent.
At the end of the second quarter, 40 hedge funds in Insider Monkey’s website reported owning stakes in Ovintiv Inc. (NYSE:OVV), worth $739.2 million, up from 30 in Q1, valued at $533.7 million.
Truist analyst Neal Dingmann kept a Buy rating on Ovintiv Inc. (NYSE:OVV) on October 7, raising the price target from $44 to $50. He predicted rising oil and natural gas prices in the coming years, and an influx of free cash flow in these sectors.
Ovintiv Inc. (NYSE:OVV) is one of the best gas stocks to buy now, just like ConocoPhillips (NYSE:COP), Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and Devon Energy Corporation (NYSE:DVN).
Here is what Davis International Fund has to say about Ovintiv Inc. (NYSE:OVV) in their Q4 2020 investor letter:
“Energy holdings in Ovintiv also experienced detracted performance, as oil demand collapsed due to the pandemic. With approximately 70% of oil demand used for transportation, the decline in miles driven (i.e., U.S. miles driven are down 11% in 2020) and the far bigger 60–70% decline in global air passenger traffic led to a dramatic drop in oil prices.
It is our expectation that oil demand will remain weak for the foreseeable future, as flying and driving slowly recover, and that over the long term, electric vehicles and renewable energy will also decrease demand for fossil fuels. As a result, we sold out of our energy positions in 2020. We redeployed the assets in other sectors such as financial services that also saw falling stock prices, but where we had stronger conviction that the long-term health of their business was strong.”
9. EQT Corporation (NYSE:EQT)
Number of Hedge Fund Holders: 43
EQT Corporation (NYSE:EQT) is an American hydrocarbon exploration and pipeline transport company, which has been the leading gas producer in the Appalachian Basin since 2019. EQT Corporation (NYSE:EQT)’s total reserves comprise 95% of natural gas. The corporation focuses on supplying petroleum, natural gas, and natural gas liquids.
Of the hedge funds tracked by Insider Monkey at the end of June, 43 funds were bullish on EQT Corporation (NYSE:EQT), up from 35 in the previous quarter.
Mizuho analyst Vincent Lovaglio kept a Buy rating on EQT Corporation (NYSE:EQT) on October 18, with a price target of $35, raised from $29. He stated that industry wide underlying demand and supply fundamentals for natural gas continue to improve, hence the Buy rating.
8. Chesapeake Energy Corporation (NASDAQ:CHK)
Number of Hedge Fund Holders: 43
Chesapeake Energy Corporation (NASDAQ:CHK) is a hydrocarbon exploration company operating in the American energy sector since 1989. Chesapeake Energy Corporation (NASDAQ:CHK)’s asset portfolio includes natural gas and oil reserves in prime locations across the United States, with main operational facilities at Louisiana, Wyoming, Texas, and Pennsylvania. Chesapeake Energy Corporation (NASDAQ:CHK) is a producer of petroleum and natural gas, and is one of the best gas stocks according to hedge funds.
At the end of Q2, 43 hedge funds reported owning stakes in Chesapeake Energy Corporation (NASDAQ:CHK), worth $1.91 billion. This is compared to 42 hedge funds in Q1, with stakes valued at $1.82 billion.
On October 7, UBS analyst Lloyd Byrne initiated coverage of Chesapeake Energy Corporation (NASDAQ:CHK) with a Buy rating and a price target of $88. Byrne stated that Chesapeake Energy Corporation (NASDAQ:CHK)’s acquisition of Vine Energy Inc. (NYSE:VEI) for $2.2 billion in August improved its upside, and Chesapeake Energy Corporation (NASDAQ:CHK) holds quality assets at discounted valuation.
Howard Marks’ Oaktree Capital Management is the leading stakeholder in Chesapeake Energy Corporation (NASDAQ:CHK), with 11.93 million shares worth $619.87 million.
Chesapeake Energy Corporation (NASDAQ:CHK) is an excellent gas stock to buy now, like ConocoPhillips (NYSE:COP), Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and Devon Energy Corporation (NYSE:DVN).
7. Pioneer Natural Resources Company (NYSE:PXD)
Number of Hedge Fund Holders: 45
Pioneer Natural Resources Company (NYSE:PXD) is a Texas-based natural gas company, operating out of Cline Shale, where it owns the largest acreage. The company is engaged in hydrocarbon exploration, and produces natural gas, petroleum, and natural gas liquids. Pioneer Natural Resources Company (NYSE:PXD) is a Fortune 500 company.
At the end of June, 45 hedge funds were long Pioneer Natural Resources Company (NYSE:PXD), up from 37 in the previous quarter. Jonathan Dawson’s Southport Management holds a leading stake in Pioneer Natural Resources Company (NYSE:PXD), valued at $406.95 million.
Piper Sandler analyst Mark Lear raised the price target from $222 to $254 on Pioneer Natural Resources Company (NYSE:PXD)’s shares, while keeping an Overweight rating on the stock, citing strong industry fundamentals for the future.
Pioneer Natural Resources Company (NYSE:PXD) is one of the best gas stocks to purchase according to hedge funds, just like ConocoPhillips (NYSE:COP), Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and Devon Energy Corporation (NYSE:DVN).
6. Cheniere Energy, Inc. (NYSE:LNG)
Number of Hedge Fund Holders: 49
Cheniere Energy, Inc. (NYSE:LNG) is a provider of liquified natural gas (LNG), being the largest provider of LNG in the US and the second largest in the world. Cheniere Energy, Inc. (NYSE:LNG) employs modern energy infrastructure to deliver clean and sustainable energy, with local operations in Texas and Louisiana, and global offices in London, Beijing, Singapore, and Tokyo. Cheniere Energy, Inc. (NYSE:LNG) is one of the best gas stocks to purchase.
Of the hedge funds tracked by Insider Monkey, 49 funds were bullish on Cheniere Energy, Inc. (NYSE:LNG) at the end of June, up from 40 in Q1.
Cowen analyst Jason Gabelman, on October 21, kept an Outperform rating on Cheniere Energy, Inc. (NYSE:LNG), raising the price target to $120 from $109. The analyst based his rating on a normalized commodity market, and the strong global gas spot market over the coming years.
5. Devon Energy Corporation (NYSE:DVN)
Number of Hedge Fund Holders: 50
Devon Energy Corporation (NYSE:DVN) is an American energy, oil, and natural gas corporation focused on hydrocarbon exploration. Devon Energy Corporation (NYSE:DVN)’s operational plants are located in the Delaware Basin, Eagle Ford, Anadarko Basin, Powder River Basin and Williston Basin.
Piper Sandler analyst Mark Lear kept an Overweight rating on Devon Energy Corporation (NYSE:DVN) on October 21, with a $54 price target, up from $38. The analyst stated that the gas industry is set to reduce capex and execute maintenance budgets in 2022, which would bring back the investors to the sectors after higher than expected commodity prices.
Jonathan Dawson’s Southport Management is the leading stakeholder in Devon Energy Corporation (NYSE:DVN), with stakes worth $1.2 billion. Overall, 50 hedge funds were long Devon Energy Corporation (NYSE:DVN) at the end of June, down from 52 in Q1.
Here is what GoodHaven Capital Management has to say about Devon Energy Corporation in their Q4 2020 investor letter:
“After a rough start to the year our two biggest energy holdings – WPX Energy rebounded materially in the last six months though energy was still our biggest detractor for the year. I’ve previously written about deciding earlier this year to direct new capital towards better businesses versus adding more to the energy sector, but given the material optionality at WPX, we opted to maintain a material exposure. Recently WPX announced an all stock merger with a larger competitor – Devon Energy – which will leave the new company with plenty of cash flow at lower oil prices, less leverage, and material upside to higher commodity prices.”
4. ConocoPhillips (NYSE:COP)
Number of Hedge Fund Holders: 50
ConocoPhillips (NYSE:COP) is a multinational American hydrocarbon exploration company, with operations in 17 countries and production units in the United States, Norway, Canada, Australia, Malaysia, Libya, China, and Qatar. ConocoPhillips (NYSE:COP) made the largest oil discovery in 2020, and produces petroleum, natural gas, natural gas liquids, and bitumen.
At the end of the second quarter, 50 hedge funds in Insider Monkey’s database were long ConocoPhillips (NYSE:COP), down from 51 in the previous quarter. Ken Fisher’s Fisher Asset Management is the biggest stakeholder in ConocoPhillips (NYSE:COP).
Here is what ClearBridge Investments has to say about ConocoPhillips in its Q1 2021 investor letter:
“While reducing in health care and consumer staples, we increased our exposure to high-quality names in economically sensitive areas of the market. We added to low-cost, high-quality energy names (including) ConocoPhillips. We are positive on the company’s strong balance sheets, competitive positions and exposure to an economic recovery.”
3. Chevron Corporation (NYSE:CVX)
Number of Hedge Fund Holders: 50
Chevron Corporation (NYSE:CVX) is an American multinational energy company, which is also the second largest oil company in America. Chevron Corporation (NYSE:CVX) serves customers and markets across 180 countries, and is one of the direct successors of John Rockefeller’s Standard Oil. Chevron Corporation (NYSE:CVX)’s main operations include manufacturing and selling gasoline, natural gas, lubricants, fuels, and petrochemicals. It is one of the top gas stocks to buy now.
At the end of Q2, 50 hedge funds monitored by Insider Monkey held stakes in Chevron Corporation (NYSE:CVX), up from 41 in Q1.
On July 30, Chevron Corporation (NYSE:CVX) reported earnings for the second quarter. The EPS was $.171, $0.11 more than analysts’ had estimated. The revenue also exceeded forecasts by $1.15 billion, at $37.60 billion.
Truist analyst Neal Dingmann kept a Buy rating on Chevron Corporation (NYSE:CVX) on October 7, with a price target of $150, up from $145.
ClearBridge Investments mentioned Chevron Corporation (NYSE:CVX) in its Q1 2021 investor letter. Here is what they said:
“While reducing in health care and consumer staples, we increased our exposure to high-quality names in economically sensitive areas of the market. We added to low-cost, high-quality energy names, (including) Chevron. We are positive on the company’s strong balance sheets, competitive positions and exposure to an economic recovery.”
2. Occidental Petroleum Corporation (NYSE:OXY)
Number of Hedge Fund Holders: 57
Occidental Petroleum Corporation (NYSE:OXY) is yet another American hydrocarbon exploration company, with operations in the United States, the Middle East, and Columbia. The company also manufactures petrochemicals in the US, Canada, and Chile. Of its enormous gas reserves as of 2020, 30% produce natural gas, 51% petroleum, and 19% natural gas liquids. Occidental Petroleum Corporation (NYSE:OXY) is traded as a S&P 500 Component, and is one of the best gas stocks, with strong fundamentals and popular among hedge funds.
At the end of June, 57 hedge funds were long Occidental Petroleum Corporation (NYSE:OXY), up from 52 in Q1.
Truist analyst Neal Dingmann upgraded Occidental Petroleum Corporation (NYSE:OXY)’s rating from Hold to Buy, with a price target of $50, up from $35 on October 18. He stated that Occidental Petroleum Corporation (NYSE:OXY) was set to experience record free cash flow from asset monetization, which would allow the company to return to 2020 level dividends soon.
1. Exxon Mobil Corporation (NYSE:XOM)
Number of Hedge Fund Holders: 68
Exxon Mobil Corporation (NYSE:XOM) is an American multinational oil and gas corporation, with its headquarters in Texas. The company was formed after the merger of Exxon and Mobil, descendants of John Rockefeller’s Standard Oil, in 1999. It is one of the leading Big Oil companies, dealing in crude oil, oil products, natural gas, petrochemicals, and power generation.
Out of the 873 hedge funds tracked by Insider Monkey, 68 funds were bullish on Exxon Mobil Corporation (NYSE:XOM) at the end of Q2, up from 65 in the first quarter. Some of the firm’s biggest and most prominent stakeholders are The Vanguard Group, BlackRock, and the State Street Corporation.
Lucas Herrmann, an analyst from Exane BNP Paribas, downgraded Exxon Mobil Corporation (NYSE:XOM) from Neutral to Underperform with a price target of $60 on October 11.
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Disclosure: None. 10 Best Gas Stocks To Buy Now is originally published on Insider Monkey.
