In this article, we discuss the 10 best fuel stocks to buy now.
Oil stocks have consistently underperformed the benchmark S&P 500 in the past two years, due in large part to the coronavirus pandemic but also because of muted business investment in the sector that has led to massive layoffs. However, in the past few months, as oil prices climb above $80 per barrel for the first time in years and a winter season with strong demand for fuel approaches, a group of oil exporting countries has not increased production to match targets, mostly because of concerns around the spread of the Delta variant of COVID-19.
According to a report by Deloitte, a professional services firm, oil demand has rebounded sharply in the latter half of this year after falling by 25% in April. However, despite the recovery, it is not expected to reach pre-COVID levels, instead hovering 4% beneath them through the coming months. The increase in oil prices looks set to boost oil stocks through this period and most analysts expect the industry to beat market estimates on earnings in the coming months if prices remain at their current levels for the rest of the year.
Investors who want to ride this boom in the fuel industry should check out some of the biggest companies in the area. Some of the top fuel stocks to buy now include Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and ConocoPhillips (NYSE:COP), among others discussed in detail below.
Photo by Juan Fernandez on Unsplash
Our Methodology
With this context in mind, here is our list of the 10 best fuel stocks to buy now. These were picked based on their basic business fundamentals, hedge fund sentiment, and analyst ratings.
The hedge fund sentiment around each stock was gauged using the data of 873 hedge funds tracked by Insider Monkey.
Why pay attention to hedge fund holdings? 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 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 Fuel Stocks To Buy Now
10. Golar LNG Limited (NASDAQ:GLNG)
Number of Hedge Fund Holders: 17
Golar LNG Limited (NASDAQ:GLNG) features on our list of the best fuel stocks to buy now as the company has benefited from the record increase in LNG price in the past few months. In October, the company announced that it expected to realize $62 million in net income from oil derivatives for the full year. The announcement came as the prices of crude touched multi-year highs of $83/bbl. The company also priced a $300 million bond issue that month.
In earnings results for the second quarter, posted in August, Golar LNG Limited (NASDAQ:GLNG) reported a revenue of more than $104 million over the period, up 2% year-on-year and beating estimates by $0.47 million.
At the end of the second quarter of 2021, 17 hedge funds in the database of Insider Monkey held stakes worth $360 million in Golar LNG Limited (NASDAQ:GLNG).
Just like Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and ConocoPhillips (NYSE:COP), Golar LNG Limited (NASDAQ:GLNG) is one of the stocks on the radar of elite investors.
9. Cameco Corporation (NYSE:CCJ)
Number of Hedge Fund Holders: 25
BMO Capital, RBC Capital, and Scotiabank all recently raised the price target on Cameco Corporation (NYSE:CCJ) stock. Scotiabank analyst Orest Wowkodaw has an Outperform rating on the shares with a target of C$38. The company markets uranium, an increasingly important source of nuclear fuel used to produce electricity around the world. In September, uranium prices had hit nine-year highs as Sprott Physical Uranium Trust resumed purchases.
In late September, Cameco Corporation (NYSE:CCJ) had announced that it had partnered with three companies in Canada to evaluate a uranium supply chain that would be used to supply reactors in Poland over the next few years.
Among the hedge funds being tracked by Insider Monkey, Florida-based investment firm Kopernik Global Investors is a leading shareholder in Cameco Corporation (NYSE:CCJ) with 9 million shares worth more than $175 million.
8. Green Plains Inc. (NASDAQ:GPRE)
Number of Hedge Fund Holders: 26
Green Plains Inc. (NASDAQ:GPRE) makes and distributes ethanol. The company is one of the top biofuel stocks on the market. Biofuel stocks have pulled back in recent weeks on the back of reports that the Environmental Protection Agency in the United States is proposing cuts to blending requirements in 2021 on the request of oil giants that had argued for the cuts after bottoming out during the virus crisis in 2020.
However, Green Plains Inc. (NASDAQ:GPRE) and other companies are lobbying President Biden not to sign the proposal. Biden had previously approved $1 billion in biofuel infrastructure investments as part of a massive influx of spending into clean energy.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Rubric Capital Management is a leading shareholder in Green Plains Inc. (NASDAQ:GPRE) with 1.3 million shares worth more than $44 million.
7. Plug Power Inc. (NASDAQ:PLUG)
Number of Hedge Fund Holders: 34
Plug Power Inc. (NASDAQ:PLUG) markets hydrogen fuel cell solutions. The stock has been rallying as a global climate conference kicks off in Glasgow and world leaders pledge to increase investments in clean energy and scale back on fossil fuels. Piper Sandler, Truist, and BMO Capital have all raised price targets on the stock recently. Roth Capital analyst Craig Irwin also recently reiterated a Buy rating on the stock with a price target of $45.
Plug Power Inc. (NASDAQ:PLUG) stock has also soared on the back of a partnership the company has signed with Airbus to explore the use of green hydrogen in future aircrafts and airports around the world.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm DE Shaw is a leading shareholder in Plug Power Inc. (NASDAQ:PLUG) with 14 million shares worth more than $507 million.
In its Q2 2020 investor letter, Massif Capital, an asset management firm, highlighted a few stocks and Plug Power Inc. (NASDAQ:PLUG) was one of them. Here is what the fund said:
“We also closed our short position in Plug Power this quarter as the market was subsumed with enthusiasm over their recent acquisitions, resulting in an almost 80% rally in the stock over ten trading days. Our decision to exit was painful at the time as we were forced to reconcile with a collective exuberance that was (and is, in our opinion) not grounded reality. In hindsight, it was the correct decision as we avoided most of its recent vertical trajectory.”
6. Pioneer Natural Resources Company (NYSE:PXD)
Number of Hedge Fund Holders: 45
After two major acquisitions in the first part of the year that cost over $10 billion, Pioneer Natural Resources Company (NYSE:PXD) has stepped up efforts in recent months to streamline business and reduce debt. As part of the plan, the company has put up some assets in the Texas Delaware Basin up for sale, hoping to raise $2 billion. It has also benefited from the rise in crude oil prices which topped $80 per barrel for the first time in seven years last month.
Mizuho analyst Vincent Lovaglio recently raised the price target on Pioneer Natural Resources Company (NYSE:PXD) stock to $263 from $231, keeping a Buy rating and noting that the energy sector was poised to outperform the broader market in the coming months.
Among 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 $206 million.
Alongside Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and ConocoPhillips (NYSE:COP), Pioneer Natural Resources Company (NYSE:PXD) is one of the stocks that hedge funds are buying.
5. Cheniere Energy, Inc. (NYSE:LNG)
Number of Hedge Fund Holders: 49
On October 25, investment advisory Morgan Stanley maintained an Overweight rating on Cheniere Energy, Inc. (NYSE:LNG) stock and raised the price target to $132 from $94, underlining that the firm had posted market-beating earnings for three quarters in a row and the stock has risen by more than 110% year-to-date. The firm operates as an energy infrastructure company with core interests in the LNG business.
Cheniere Energy, Inc. (NYSE:LNG) recently signed a deal with Glencore under which the latter agreed to purchase LNG worth $800,000 metric tonnes per year for thirteen years beginning in 2023. The share price of the company jumped 2% after the deal was made public.
At the end of the second quarter of 2021, 49 hedge funds in the database of Insider Monkey held stakes worth $2.9 billion in Cheniere Energy, Inc. (NYSE:LNG), up from 40 in the previous quarter worth $2.5 billion.
4. Devon Energy Corporation (NYSE:DVN)
Number of Hedge Fund Holders: 50
Devon Energy Corporation (NYSE:DVN) operates as an independent energy company and is based in Oklahoma. It recently posted earnings for the third quarter, reporting earnings per share of $1.08, beating predictions by $0.15. The revenue over the period was $3.4 billion, up 224% year-on-year and beating estimates by $1 billion. The company also increased the fixed-plus-variable dividend payout by 71% to $0.84 per share.
Mizuho analyst Vincent Lovaglio recently raised the price target on Devon Energy Corporation (NYSE:DVN) stock to $59 from $38 and reiterated a Buy rating, underlining that there was increased confidence in oil exploration stocks at the market.
Among 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 7.5 million shares worth more than $219 million.
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.”
3. ConocoPhillips (NYSE:COP)
Number of Hedge Fund Holders: 50
ConocoPhillips (NYSE:COP) recently agreed to purchase the Permian Basin assets of oil giant Shell in a deal worth $9.5 billion. The purchase of the shale oil assets is part of a plan by the fossil fuel firm to diversify away from traditional oil. The firm has solid fundamentals and recently beat market expectations on earnings per share by $0.25 and increased the quarterly dividend by 7% to $0.46 per share.
On October 7, Truist analyst Neal Dingmann maintained a Buy rating on ConocoPhillips (NYSE:COP) stock and raised the price target to $100 from $84, noting that free cash flows for oil firms looked set to easily top expectations in the coming months.
At the end of the second quarter of 2021, 50 hedge funds in the database of Insider Monkey held stakes worth $1.1 billion in ConocoPhillips (NYSE:COP).
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.”
2. Chevron Corporation (NYSE:CVX)
Number of Hedge Fund Holders: 50
Chevron Corporation (NYSE:CVX) is one of the biggest oil companies in the world. It has benefited greatly from the recent increase in oil prices that jumped above $85 per barrel in late October, topping seven-year highs of $80 touched earlier in the month. The earnings results of the firm for the third quarter reflected further potential as well, as it beat market expectations on earnings per share and revenue by $0.77 and $3.8 billion respectively.
Chevron Corporation (NYSE:CVX) is also recognized as a trusted name in the dividend stock world. It recently declared a quarterly dividend of $1.34 per share, in line with previous. The forward yield was 4.78%.
At the end of the second quarter of 2021, 50 hedge funds in the database of Insider Monkey held stakes worth $4.2 billion in Chevron Corporation (NYSE:CVX), up from 41 in the preceding quarter worth $4.8 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.”
1. Exxon Mobil Corporation (NYSE:XOM)
Number of Hedge Fund Holders: 68
Morgan Stanley analyst Devin McDermott recently kept an Overweight rating on Exxon Mobil Corporation (NYSE:XOM) stock with a price target of $149, noting that oil giants like Exxon looked set for “catch up” trade in the coming months amid oil price hikes. The firm recently beat market predictions on earnings per share and revenue and has also been exploring the deployment of low carbon technologies in Indonesia as part of an energy transition plan.
Reports from November 2 indicate that Exxon Mobil Corporation (NYSE: XOM) has agreed to sell its stake in a deepwater natural gas project in the Black Sea to a Romanian firm in a deal worth more than $1 billion.
At the end of the second quarter of 2021, 68 hedge funds in the database of Insider Monkey held stakes worth $3.6 billion in Exxon Mobil Corporation (NYSE:XOM), up from 65 in the preceding quarter worth $2.7 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.”
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Disclosure. None. 10 Best Fuel Stocks To Buy Now is originally published on Insider Monkey.
