Oil prices have been on a steady rise since the middle of last June, surging by over 50% to reach $66 per barrel by the end of January. Naturally, that surge was great news for energy investors, as many stocks in the sector swing in lockstep with the price of crude. The broader market selloff earlier this month dragged crude back down to $59 in early-February, but it’s since rebounded to over $63 and there could be further gains in store, as oil inventories have finally bottomed out after three years of steady oversupply.
Given that some energy equities have yet to fully rebound from the market selloff, now looks like a great time to grab some stocks at a discount. To that end, we’ve uncovered three of the most popular energy stocks among hedge funds as of the end of 2017 (the hedge funds in our database own over 15% of each company’s shares), all of which have yet to fully recover from the market selloff.
At Insider Monkey, we track insider trading and hedge fund activity to uncover actionable patterns and profit from them. We track over 600 of the most successful hedge funds ever in our database and identify only their best stock picks. Our newest quarterly stock picks were released this month, which investors can gain access to by becoming a subscriber to Insider Monkey’s premium newsletters.
Patterson-UTI Energy, Inc. (NASDAQ:PTEN)
How Many Hedge Funds Own PTEN: 40
How Much Money Hedge Funds Have Invested in PTEN: $805 million
Recent Patterson-UTI Energy, Inc. (NASDAQ:PTEN) Selloff Unjustified: Shares of Patterson-UTI have been battered to the tune of a 20% decline in February, due in part to the broader selloff as well as a disappointing earnings report. Patterson-UTI missed earnings estimates by $0.02 per share as expenses soared in the fourth quarter (direct operating expenses tripled to $567.9 million).
However, BMO upgraded Patterson-UTI’s shares to ‘Outperform’ on February 14, saying the February declines were unwarranted, saying that the company’s fundamentals are improving that there could be some further second-half 2018 upside thanks to up to 200 rigs being added this year.
Bigger Patterson-UTI Energy, Inc. (NASDAQ:PTEN) Dividend on the Way?: Some investors were also disappointed at the lack of a dividend increase during the company’s latest conference call. However, BMO believes the company’s free cash flow yield will be one of the best in the industry in 2018 and that its dividend could receive a nice hike in the future because of that, perhaps as much as 50%.
On the next page we’ll look at two other cheap energy stocks that are popular among the best investors in the world.
EQT Corporation (NYSE:EQT)
How Many Hedge Funds Own EQT: 50
How Much Money Hedge Funds Have Invested in EQT: $2.66 billion
EQT Corporation (NYSE:EQT) Spins Off Midstream Division: Several prominent hedge funds were among a group of investors pushing EQT to spin-off its midstream division, including Barry Rosenstein‘s activist hedge fund JANA Partners, which had a $543 million EQT position at the end of 2017. The company obliged those investors on February 21, announcing that it would do just that. The deal, which is tax-free to shareholders, will see EQT’s midstream division merge with Rice Midstream Partners LP (NYSE:RMP), vastly simplifying EQT’s corporate structure and creating two attractive pure-play companies.
EQT Corporation (NYSE:EQT) Free Cash Flow to See Boost?: EQT’s free cash flow, which has been mired in negativity territory for much of the last five years, is expected to greatly improve thanks to the reorganization. EQT’s existing contracts with its now-former midstream division are not expected to be impacted by the deal.
RSP Permian Inc (NYSE:RSPP)
How Many Hedge Funds Own RSPP: 40
How Much Money Hedge Funds Have Invested in RSPP: $1.3 billion
Bullish Signs Ahead of RSP Permian Inc (NYSE:RSPP)’s Earnings Call Later Today: Goldman Sachs is particularly bullish on RSP Permian, having a $56 price target on the stock and exclaiming that the company’s acreage in the Midland and Delaware Basins gives it one of the most attractive portfolios among smaller E&P’s. A report from Goldman Sachs earlier this month showed that the company’s well performance was among the best in the industry and exceeded expectations in 2017.
Hedge Fund Ownership of RSP Permian Inc (NYSE:RSPP): At the end of 2017, 40 of the hedge funds that are tracked by Insider Monkey were shareholders of RSP Permian, owning $1.3 billion worth of the company’s shares, representing 20.1% of the stock’s float. Billionaire Dan Loeb‘s Third Point built a 4.6 million-share position in the stock last year, valued at $187 million, while billionaire Israel Englander’s Millennium Management bought 2.24 million RSP shares in the fourth-quarter.