In this article, we discuss the 10 best gas stocks to buy now. If you want to skip our detailed analysis of these companies and the outlook for the gas sector, go directly to 5 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.
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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.
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Disclosure: None. 10 Best Gas Stocks To Buy Now is originally published on Insider Monkey.
