In this article, we discuss the 10 oil and gas stocks to buy according to Mario Gabelli.
The Russian invasion of Ukraine has pushed energy prices higher in recent weeks. Amid inflation and OPEC disagreements over a hike in output to meet rising demand, the prices of oil and gas had already touched record highs over the past few months. As the West sanctions Russian exports and the Fed prepares to raise interest rates, investors have been loading up on oil and gas stocks. European natural gas prices are now at levels fourteen times those in the US. In this environment, it has become hard to identify energy stocks trading at bargain prices.
Mario Gabelli of GAMCO Investors, an industry veteran in this regard, can help. Gabelli has earned a reputation over the years for identifying value stocks that offer long-term growth potential. His fund, GAMCO Investors, had a portfolio value of over $11.6 billion at the end of the fourth quarter of 2021. Some of the top energy stocks in the portfolio of elite hedge funds at the end of December 2021 included Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and ConocoPhillips (NYSE:COP), among others discussed in detail below..
Energy Prices in Turmoil Amid Sanctions
On March 6, the price of crude oil jumped to a 13-year high of over $130 per barrel. The jump was attributed to the supply disruptions from Russia amid the invasion of Ukraine and the prospect of Western sanctions on Russian energy exports to Europe. However, after Germany signaled that it would not be 100% onboard with a blanket ban on Russian oil and gas, the prices calmed down again. Gas prices in Europe, heavily reliant on Moscow, have jumped to ten-year highs as well and futures contracts for gas are now trading at a record $293 in the region.
In addition to domestic requirements for heating and cooking, Russian gas is also used to power key industries in Europe that include fertilizer and metal manufacturers. Both these industries have been forced to drastically reduce amid supply problems from Russia. Moscow is using this advantage to limit exports and apply pressure on the West to remove sanctions. So far, neither side has been willing to back down from the hardcore stance. As the war intensifies, the crisis is likely to persist and result in further increases in energy prices.
Our Methodology
The companies listed below were picked from the investment portfolio of GAMCO Investors at the end of the fourth quarter of 2021. The stocks that operate in the oil and gas sector were preferred for the list.
Data from around 900 elite hedge funds tracked by Insider Monkey was used to identify the number of hedge funds that hold stakes in each firm.
Oil and Gas Stocks to Buy According to Mario Gabelli
10. National Fuel Gas Company (NYSE:NFG)
Number of Hedge Fund Holders: 21
National Fuel Gas Company (NYSE:NFG) is a diversified energy company. Major hedge funds hold large stakes in the firm. Among the hedge funds being tracked by Insider Monkey, Boston-based firm Arrowstreet Capital is a leading shareholder in National Fuel Gas Company with 382,644 shares worth more than $24 million.
According to the latest filings, GAMCO Investors owned over 1.2 million shares of National Fuel Gas Company at the end of the fourth quarter of 2021 worth $80 million, representing 0.68% of the portfolio.
Just like Exxon Mobil Corporation, Chevron Corporation, and ConocoPhillips, National Fuel Gas Company is one of the energy stocks in the spotlight as inflation batters the market.
In its Q1 2021 investor letter, Heartland Advisors, an asset management firm, highlighted a few stocks and National Fuel Gas Company was one of them. Here is what the fund said:
“The ho-hum Utilities sector isn’t typically a place to hunt for strong growth prospects. However, for investors willing to do their homework, opportunities do exist. Portfolio holding National Fuel Gas Company is a prime example.
National Fuel Gas Company is a dividend aristocrat—50 consecutive years of dividend increases. Although the business is lumped in with run-of-the-mill power companies, it is much more diverse. In addition to its utility operations, a pipeline and storage division produces almost a quarter of its profits, and the company generates nearly 40% of its bottom line from natural gas exploration and production.
Shares of National Fuel Gas Company are trading at a mid-teens discount to their historic average based on price/book. Given the state of the energy industry over the past few years, we believe the company’s gas unit could be an overlooked source of growth. Additionally, the utility recently received regulatory approval on a natural gas pipeline expansion in Pennsylvania, which is expected to produce a windfall in free cash flow.”
9. Southwest Gas Holdings, Inc. (NYSE:SWX)
Number of Hedge Fund Holders: 16
Southwest Gas Holdings, Inc. (NYSE:SWX) is a natural gas utilities company. Latest data shows that GAMCO Investors owned more than 726,000 shares of the company at the end of the fourth quarter of 2021 worth over $50 million, representing 0.43% of the portfolio.
Elite hedge funds remain bullish on Southwest Gas Holdings, Inc.. At the end of the fourth quarter of 2021, 16 hedge funds in the database of Insider Monkey held stakes worth $359 million in Southwest Gas Holdings, Inc., up from 10 in the preceding quarter worth $161 million.
8. Dril-Quip, Inc. (NYSE:DRQ)
Number of Hedge Fund Holders: 18
Dril-Quip, Inc. (NYSE:DRQ) makes and sells drilling and production equipment. Hedge funds have been loading up on the stock in recent months. At the end of the fourth quarter of 2021, 18 hedge funds in the database of Insider Monkey held stakes worth $57 million in Dril-Quip, Inc., compared to 12 in the previous quarter worth $38 million.
Regulatory filings show that GAMCO Investors owned more than 1.1 million shares of Dril-Quip, Inc. at the end of December 2021 worth $23 million, representing 0.19% of the portfolio.
Here is what Palm Valley Capital Management has to say about Dril-Quip, Inc. in its Q4 2021 investor letter:
“During the fourth quarter we took advantage of weakness in the precious metal and energy sectors to acquire two small new positions that we believe are selling at attractive prices relative to their strong, asset heavy balance sheets, (including) Dril-Quip, Inc.. Founded in 1981, DrilQuip manufactures drilling and production equipment that is used in deepwater energy exploration and production. Dril-Quip’s customers include major integrated and foreign national oil and gas companies such as Chevron, Shell, Exxon, Murphy, and Petrobras. Similar to most energy equipment and service companies, Dril-Quip, Inc. performed wonderfully during the energy boom that peaked in 2014. Revenues, operating income, and free cash flow benefited tremendously from bloated E&P budgets and the focus on production growth. Of course, oil prices eventually collapsed in 2014 from $110 per barrel to $29 in 2016, with oil briefly turning negative in 2020! During this time, energy companies reduced their capital expenditures considerably, driving down Dril-Quip’s revenues and earnings.
Dril-Quip’s balance sheet is extraordinary with nearly a billion dollars of tangible book value ($26.90 per share). The majority of the company’s assets are liquid with net working capital exceeding $20 per share, including more than $10 per share in cash. Although we can’t precisely predict when deepwater energy exploration and production will rebound, there are signs that offshore activity has bottomed and may increase in 2022. We believe Dril-Quip’s balance sheet provides us with a sufficient margin of safety and the necessary liquidity to take advantage of improving industry conditions.”
7. RPC, Inc. (NYSE:RES)
Number of Hedge Fund Holders: 13
RPC, Inc. (NYSE:RES) provides oilfield services. Securities filings reveal that GAMCO Investors owned over 3.2 million shares of the company at the end of December 2021 worth $14.9 million, representing 0.12% of the portfolio.
The hedge fund sentiment around RPC, Inc. is largely positive. At the end of the fourth quarter of 2021, 13 hedge funds in the database of Insider Monkey held stakes worth $21 million in RPC, Inc., compared to 12 in the preceding quarter worth $26 million.
6. Black Hills Corporation (NYSE:BKH)
Number of Hedge Fund Holders: 19
Black Hills Corporation (NYSE:BKH) is a natural gas and electric utility firm. Hedge funds have been piling into the stock. At the end of the fourth quarter of 2021, 19 hedge funds in the database of Insider Monkey held stakes worth $71 million in Black Hills Corporation, compared to 16 the preceding quarter worth $55 million.
The hedge fund of Mario Gabelli entered the first quarter of 2022 with over 201,000 shares of Black Hills Corporation in the portfolio worth more than $14.2 million, representing 0.12% of the portfolio.
Along with Exxon Mobil Corporation, Chevron Corporation, and ConocoPhillips, Black Hills Corporation is one of the stocks that hedge funds are buying as fuel prices jump.
5. ONEOK, Inc. (NYSE:OKE)
Number of Hedge Fund Holders: 25
ONEOK, Inc. (NYSE:OKE) is an oil and gas storage and transportation firm. Hedge funds have been loading up on the stock. At the end of the fourth quarter of 2021, 25 hedge funds in the database of Insider Monkey held stakes worth $94 million in ONEOK, Inc., up from 18 in the preceding quarter worth $124 million.
According to the latest filings, GAMCO Investors owned over 187,000 shares of ONEOK, Inc. at the end of the fourth quarter of 2021 worth $11 million, representing 0.09% of the portfolio.
In its Q3 2021 investor letter, Miller Howard Investments, an asset management firm, highlighted a few stocks and ONEOK, Inc. was one of them. Here is what the fund said:
”In late August, we increased the portfolio’s cyclical exposure by trimming utilities after a period of relative outperformance and reallocating the capital to midstream energy, which had pulled back over the summer. We added ONEOK Inc. (OKE) with the expectation that it will benefit from increasing natural gas and natural gas liquids (NGL) recovery in the Bakken region.”
4. Halliburton Company (NYSE:HAL)
Number of Hedge Fund Holders: 43
Halliburton Company (NYSE:HAL) provides oil and gas equipment services. Latest data shows that GAMCO Investors owned more than 444,000 shares of the company at the end of the fourth quarter of 2021 worth over $10 million, representing 0.08% of the portfolio.
Halliburton Company has been drawing the interest of top investment firms in recent months. Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Pzena Investment Management is a leading shareholder in Halliburton Company with 38 million shares worth more than $883 million.
3. NewMarket Corporation (NYSE:NEU)
Number of Hedge Fund Holders: 45
NewMarket Corporation (NYSE:NEU) operates in the petroleum additives business. It is one of the top petroleum stocks on Wall Street. At the end of the fourth quarter of 2021, 45 hedge funds in the database of Insider Monkey held stakes worth $1.3 billion in NewMarket Corporation, compared to 48 in the preceding quarter worth $774 million.
Regulatory filings show that GAMCO Investors owned 15,000 shares of NewMarket Corporation at the end of December 2021 worth $5.1 million, representing 0.04% of the portfolio.
2. UGI Corporation (NYSE:UGI)
Number of Hedge Fund Holders: 31
UGI Corporation (NYSE:UGI) distributes and transports energy products. Securities filings reveal that GAMCO Investors owned 100,059 shares of the company at the end of December 2021 worth $4.5 million, representing 0.03% of the portfolio.
Major hedge funds are bullish on UGI Corporation as energy prices rise. Among the hedge funds being tracked by Insider Monkey, New York-based investment firm First Eagle Investment Management is a leading shareholder in UGI Corporation with 8.6 million shares worth more than $396 million.
1. Navigator Holdings Ltd. (NYSE:NVGS)
Number of Hedge Fund Holders: 14
Navigator Holdings Ltd. (NYSE:NVGS) owns and operates a fleet of liquified natural gas carriers. Elite hedge funds hold large stakes in the company. Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Royce & Associates is a leading shareholder in Navigator Holdings Ltd. with 1.1 million shares worth more than $9.7 million.
The hedge fund of Mario Gabelli entered the first quarter of 2022 with 512,001 shares of Navigator Holdings Ltd. in the portfolio worth more than $4.5 million, representing 0.03% of the portfolio.
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This article is originally published at Insider Monkey.
