In this article, we discuss the 10 best oil stocks to buy amid post-COVID demand boom and price volatility.
Oil companies, perhaps one of the biggest losers of the coronavirus lockdowns and the dramatic decrease in domestic and international travel last year, are on the rebound trail as the post-COVID economy takes off, resulting in increased demand for oil in the wake of cars returning to roads and airports around the world reopening for business. According to a study published by the World Bank, crude oil prices are expected to average $56/bbl in 2021 and $60/bbl in 2022, driven by production constraints put in place by oil producing nations.
Some of the companies that can expect to take advantage of the increase in oil prices over the next few months include Exxon Mobil Corporation (NYSE: XOM), Chevron Corporation (NYSE: CVX), and Energy Transfer LP (NYSE: ET-PD), among others. Oil giants like Exxon Mobil Corporation (NYSE: XOM) are in the process of transitioning away from fossil fuels, the firm has adopted economic, social, and governance (ESG) policies in house to signal intent in this regard, but still depend in large part on oil and other fossil fuels for revenue generation.
However, some have warned of drastic consequences if energy firms are forced to transition away from oil in a hasty manner. In early June, Igor Sechin, the chief of Russian oil firm Rosneft, warned of a severe oil shortage if consumption continued and investments into the industry were discouraged. He made the comments while speaking to an energy panel at the International Economic Forum. As oil prices reach their highest levels in six years, largely as a result of delays in production increases by oil producing nations, investors should take note.
The Organization of the Petroleum Exporting Countries (OPEC), which includes some of the top oil producing nations in the world, and OPEC+, which has an additional ten members, including Russia and Kazakhstan, have recently postponed talks regarding a disagreement over production curbs. However, analysts expect a major policy decision in this regard soon. Stephen Schork, an advisor at The Schork Group, an energy analysis firm, told news platform CNBC earlier this week that it was highly likely that the production issue was going to resolve itself.
It remains to be seen how OPEC nations resolve their differences and bring much-needed stability to the prices of oil. As new oil projects face the wrath of environmentalists, it might not be too long before OPEC countries are forced to cooperate for their own survival. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, 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 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. 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.
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With this context in mind, here is our list of the 10 best oil stocks to buy amid post-COVID demand boom and price volatility. These were ranked keeping in mind hedge fund sentiment, business fundamentals, and the analyst ratings for each firm.
Best Oil Stocks to Buy Amid Post-COVID Demand Boom and Price Volatility
10. Dorian LPG Ltd. (NYSE: LPG)
Number of Hedge Fund Holders: 18
Dorian LPG Ltd. (NYSE: LPG) is a petroleum and gas transportation firm. It is ranked tenth on our list of 10 best oil stocks to buy amid post-COVID demand boom and price volatility. The company’s shares have returned 75% to investors over the course of the past twelve months.
On May 19, Dorian LPG Ltd. (NYSE: LPG) posted earnings for the fourth fiscal quarter, reporting earnings per share of $0.86, beating market estimates by $0.01. The revenue over the period was close to $100 million, up close to 5% year-on-year.
At the end of the first quarter of 2021, 18 hedge funds in the database of Insider Monkey held stakes worth $99 million in Dorian LPG Ltd. (NYSE: LPG), up from 14 the preceding quarter worth $128 million.
Just like Exxon Mobil Corporation (NYSE: XOM), Chevron Corporation (NYSE: CVX), and Energy Transfer LP (NYSE: ET-PD), Dorian LPG Ltd. (NYSE: LPG) is one of the stocks to buy amid post-COVID demand boom and price volatility.
9. Pioneer Natural Resources Company (NYSE: PXD)
Number of Hedge Fund Holders: 37
Pioneer Natural Resources Company (NYSE: PXD) is an energy firm exploring and producing oil and gas. It is placed ninth on our list of 10 best oil stocks to buy amid post-COVID demand boom and price volatility. The stock has returned 71% to investors over the course of the past year.
On June 21, investment advisory Bernstein upgraded Pioneer Natural Resources Company (NYSE: PXD) stock to Outperform from Market Perform with a price target of $202, up from the previous target of $156.
Out of the hedge funds being tracked by Insider Monkey, Wyoming-based investment firm Adage Capital Management is a leading shareholder in Pioneer Natural Resources Company (NYSE: PXD) with 1.2 million shares worth more than $192 million.
Just like Exxon Mobil Corporation (NYSE: XOM), Chevron Corporation (NYSE: CVX), and Energy Transfer LP (NYSE: ET-PD), Pioneer Natural Resources Company (NYSE: PXD) is one of the stocks to buy amid post-COVID demand boom and price volatility.
8. Devon Energy Corporation (NYSE: DVN)
Number of Hedge Fund Holders: 52
Devon Energy Corporation (NYSE: DVN) is an energy company with interests in oil, gas, and natural gas liquids. It is ranked eighth on our list of 10 best oil stocks to buy amid post-COVID demand boom and price volatility. The company’s shares have returned 182% to investors in the past year.
On June 21, Devon Energy Corporation (NYSE: DVN) announced a new plan to achieve Scope 1 and 2 net zero greenhouse gas emissions by 2050. The share price of the energy firm jumped more than 3.5% after the announcement.
Out of the hedge funds being tracked by Insider Monkey, Wyoming-based investment firm Adage Capital Management is a leading shareholder in Devon Energy Corporation (NYSE: DVN) with 11.3 million shares worth more than $247 million.
Just like Exxon Mobil Corporation (NYSE: XOM), Chevron Corporation (NYSE: CVX), and Energy Transfer LP (NYSE: ET-PD), Devon Energy Corporation (NYSE: DVN) is one of the stocks to buy amid post-COVID demand boom and price volatility.
In its Q4 2020 investor letter, GoodHaven Capital Management, an asset management firm, highlighted a few stocks and Devon Energy Corporation (NYSE: DVN) was one of them. Here is what the fund said:
“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.”
7. CNX Resources Corporation (NYSE: CNX)
Number of Hedge Fund Holders: 23
CNX Resources Corporation (NYSE: CNX) is an oil and gas company based in Pennsylvania. It is placed seventh on our list of 10 best oil stocks to buy amid post-COVID demand boom and price volatility. The stock has returned 58% to investors in the past twelve months.
On April 29, CNX Resources Corporation (NYSE: CNX) posted earnings results for the first quarter of 2021, reporting earnings per share of $0.43, beating market estimates by $0.17. The revenue over the period was more than $473 million, beating market estimates by $60 million.
At the end of the first quarter of 2021, 23 hedge funds in the database of Insider Monkey held stakes worth $607 million in CNX Resources Corporation (NYSE: CNX), down from 25 in the previous quarter worth $551 million.
Just like Exxon Mobil Corporation (NYSE: XOM), Chevron Corporation (NYSE: CVX), and Energy Transfer LP (NYSE: ET-PD), CNX Resources Corporation (NYSE: CNX) is one of the stocks to buy amid post-COVID demand boom and price volatility.
In its Q1 2021 investor letter, Longleaf Partners Fund highlighted a few stocks and CNX Resources Corporation (NYSE: CNX) was one of them. Here is what the fund said:
“CNX Resources (36%, 1.86%), the Appalachian natural gas company, was another top contributor. The company earned $85 million FCF in the fourth quarter and used the profits to pay down debt and repurchase shares at a 7% annualized pace. 2021 and 2022 production is hedged at solid prices, and the company has guided to a growing $1.90 per share FCF coupon in the near term. The stock trades under 8x FCF before adjusting for farther off undeveloped acreage and the company’s pipeline infrastructure. CNX is the lowest-cost producer in the region and its PDP decline rate continues to improve, meaning it can maintain or grow future production without spending heavily. Encouragingly, CNX announced meaningful progress in its ESG initiatives in the quarter, including its commitment to transparent reporting through its adoption of Climate-Related Financial Disclosure (TCFD) and the Sustainability Accounting Standards Board (SASB) disclosure standards. We have engaged with CNX leadership on this topic over the last several years and have encouraged them to commit to these leading industry standard disclosure frameworks. Additionally, the company formed a dedicated working group focused on future emissions reduction and approved a performance measure program that ties executive compensation to meeting targeted methane emissions reduction thresholds over a three-year period.”
6. ConocoPhillips (NYSE: COP)
Number of Hedge Fund Holders: 51
ConocoPhillips (NYSE: COP) is an energy company based in Texas. It is ranked sixth on our list of 10 best oil stocks to buy amid post-COVID demand boom and price volatility. The company’s shares have returned 53% to investors in the past year.
On July 1, investment advisory Wells Fargo maintained a Buy rating on ConocoPhillips (NYSE: COP) stock with a price target of $73. The advisory noted the efforts the firm was making to improve return on capital in the ratings update.
At the end of the first quarter of 2021, 51 hedge funds in the database of Insider Monkey held stakes worth $1.2 billion in ConocoPhillips (NYSE: COP), up from 49 in the previous quarter worth $687 million.
Just like Exxon Mobil Corporation (NYSE: XOM), Chevron Corporation (NYSE: CVX), and Energy Transfer LP (NYSE: ET-PD), ConocoPhillips (NYSE: COP) is one of the stocks to buy amid post-COVID demand boom and price volatility.
In its Q1 2021 investor letter, ClearBridge Investments highlighted a few stocks and ConocoPhillips (NYSE: COP) was one of them. Here is what the fund 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) ConocoPhillips. We are positive on the company’s strong balance sheets, competitive positions and exposure to an economic recovery.”
5. Chevron Corporation (NYSE: CVX)
Number of Hedge Fund Holders: 41
Chevron Corporation (NYSE: CVX) is a California-based firm with interests in energy, chemicals, and petroleum products. It is placed fifth on our list of 10 best oil stocks to buy amid post-COVID demand boom and price volatility. The stock has offered investors returns exceeding 23% over the course of the past year.
On June 30, news agency Reuters reported that Chevron Corporation (NYSE: CVX) was considering selling two major oil-related assets worth close to $1 billion. The proceeds will be used to fund the energy transition of the firm away from fossil fuels.
At the end of the first quarter of 2021, 41 hedge funds in the database of Insider Monkey held stakes worth $4.8 billion in Chevron Corporation (NYSE: CVX), down from 50 in the preceding quarter worth $5.3 billion.
In its Q1 2021 investor letter, ClearBridge Investments highlighted a few stocks and Chevron Corporation (NYSE: CVX) was one of them. Here is what the fund 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.”
4. PDC Energy, Inc. (NASDAQ: PDCE)
Number of Hedge Fund Holders: 24
PDC Energy, Inc. (NASDAQ: PDCE) is an energy firm that operates from Colorado. It is ranked fourth on our list of 10 best oil stocks to buy amid post-COVID demand boom and price volatility. The company’s shares have offered investors returns exceeding 236% over the course of the past year.
PDC Energy, Inc. (NASDAQ: PDCE) is a solid option for those looking to retire early as it pays a healthy and regular dividend. On May 27, the firm declared a quarterly dividend of $0.12 per share.
Out of the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Harris Associates is a leading shareholder in PDC Energy, Inc. (NASDAQ: PDCE) with 2.5 million shares worth more than $87 million.
3. Energy Transfer LP (NYSE: ET-PD)
Number of Hedge Fund Holders: 25
Energy Transfer LP (NYSE: ET-PD) is a company headquartered in Texas that provides energy-related services. It is placed third on our list of 10 best oil stocks to buy amid post-COVID demand boom and price volatility. The stock has returned 62% to investors in the past twelve months.
On May 12, Energy Transfer LP (NYSE: ET-PD) founder Kelcy Warren said that the firm was considering an investment in the chemicals and plastic business in order to diversify. The comments were made at a conference in North Dakota.
Out of the hedge funds being tracked by Insider Monkey, Washington-based firm Appaloosa Management LP is a leading shareholder in Energy Transfer LP (NYSE: ET-PD) with 22.8 million shares worth more than $175 million.
In its Q1 2021 investor letter, Miller/Howard Investments highlighted a few stocks and Energy Transfer LP (NYSE: ET-PD) was one of them. Here is what the fund said:
“Another upweight was Energy Transfer (ET), which was selling at a discount on EV/ EBITDA compared with the portfolio and had an attractive +20% FCF yield. Further, ET’s ample FCF should exceed the current distribution even if the Dakota Access Pipeline were to be shut down.”
2. Exxon Mobil Corporation (NYSE: XOM)
Number of Hedge Fund Holders: 65
Exxon Mobil Corporation (NYSE: XOM) is an energy firm that explores for and produces oil and natural gas. It is ranked second on our list of 10 best oil stocks to buy amid post-COVID demand boom and price volatility. The company’s shares have returned 44% to investors in the past year.
On July 2, Exxon Mobil Corporation (NYSE: XOM) CEO Darren Woods made a statement backing a new carbon tax that he said was essential to reach net zero emissions in the fight against climate change.
At the end of the first quarter of 2021, 65 hedge funds in the database of Insider Monkey held stakes worth $2.7 billion in Exxon Mobil Corporation (NYSE: XOM), up from 63 in the preceding quarter worth $2.2 billion.
In its Q1 2021 investor letter, Harding Loevner highlighted a few stocks and Exxon Mobil Corporation (NYSE: XOM) was one of them. Here is what the fund said:
“We felt that our remaining energy holding, ExxonMobil, with its stronger balance sheet, was in a better position to ride out the cyclical slump in oil demand and even perhaps take advantage of it by investing counter-cyclically. While ExxonMobil does plan to increase capital expenditure, we’ve been disappointed in its regrettable failure to address ongoing emission trends, which reflects poorly on management’s foresight. As a result, we sold our ExxonMobil holdings.”
1. Renewable Energy Group, Inc. (NASDAQ: REGI)
Number of Hedge Fund Holders: 21
Renewable Energy Group, Inc. (NASDAQ: REGI) is an energy firm that converts natural fats, oils, and greases into advanced biofuels. It is placed first on our list of 10 best oil stocks to buy amid post-COVID demand boom and price volatility. The stock has returned 156% to investors in the past year.
Renewable Energy Group, Inc. (NASDAQ: REGI) was one of the firms that benefited from the nearly $700 million in coronavirus relief aid from the US government for biofuel companies working in the United States.
Out of the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Schonfeld Strategic Advisors is a leading shareholder in Renewable Energy Group, Inc. (NASDAQ: REGI) with 501,100 shares worth more than $33 million.
You can also take a peek at 15 Biggest Oil Companies in USA and 10 Best Nickel Stocks to Buy Now.
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Disclose. None. 10 Best Oil Stocks to Buy Amid Post-COVID Demand Boom and Price Volatility is originally published on Insider Monkey.
