5 Best Undervalued Energy Stocks to Buy

In this article, we will discuss the 5 best undervalued energy stocks to buy. If you want to explore similar stocks, you can also read 12 Best Undervalued Energy Stocks to Buy.

5. Diamondback Energy, Inc. (NASDAQ:FANG)

Number of Hedge Fund Holders: 55

PE Ratio as of December 2: 5.91

Diamondback Energy, Inc. (NASDAQ:FANG) is involved in the hydrocarbon exploration business and is headquartered in Midland, Texas. The company has a market-leading position and abundant cash flows. According to the company’s balance sheet, Diamondback Energy, Inc. (NASDAQ:FANG) has free cash flows of $3.23 billion. As of December 2, the company is trading at a PE multiple of 5x and has gained 30.06% year to date. Diamondback Energy, Inc. (NASDAQ:FANG) is one of the best undervalued energy stocks to buy now.

On November 22, Citi analyst Scott Gruber raised his price target on Diamondback Energy, Inc. (NASDAQ:FANG) to $170 from $155 and maintained a Buy rating on the shares. This November, Credit Suisse analyst William Janela raised his price target on Diamondback Energy, Inc. (NASDAQ:FANG) to $195 from $190 and reiterated an Outperform rating on the shares.

At the close of Q3 2022, Diamondback Energy, Inc. (NASDAQ:FANG)  was a part of 55 investors’ portfolios that disclosed positions worth $910.9 million in the company. This is compared to 54 positions in the previous quarter with stakes worth $811.3 million. As of September 30, Yacktman Asset Management is the top investor in the company and has a position worth $152.02 million.

4. ConocoPhillips (NYSE:COP)

Number of Hedge Fund Holders: 64

PE Ratio as of December 2: 8.78

On November 3, ConocoPhillips (NYSE:COP) posted market-beating earnings for the third quarter of fiscal 2022. The company reported an EPS of $3.60 and outperformed consensus by $0.16. The company’s revenue for the quarter amounted to $21.61 billion, up 86.07% year over year and ahead of Wall Street consensus by $3.38 billion. As of December 2, ConocoPhillips (NYSE:COP) is trading at a PE multiple of 8x and is one of the best undervalued energy stocks to buy now.

This November, Argus analyst Bill Selesky raised his price target on ConocoPhillips (NYSE:COP) to $150 from $125 and reiterated a Buy rating on the shares. On November 22, Citi analyst Alastair Syme raised his price target on ConocoPhillips (NYSE:COP) to $160 from $132 and maintained a Buy rating on the shares.

At the end of Q3 2022, 64 hedge funds were long ConocoPhillips (NYSE:COP) and disclosed positions worth $2.66 billion. This is compared to 71 hedge funds in the preceding quarter with stakes worth $2.42 billion. As of September 30, Fisher Asset Management is the top investor in the company and has a position worth $708.5 million.

Here is what ClearBridge Investments had to say about ConocoPhillips (NYSE:COP) in its third-quarter 2022 investor letter:

“ConocoPhillips (NYSE:COP) handily outperformed the energy sector, which led the value benchmark. Its exposure to natural gas helped the stock perform more in line with natural gas E&Ps, which led the sector due to the European energy crisis and U.S. shale gas being considered a secure long-term source of liquid natural gas. In addition to COP’s low-cost resource base, conservative balance sheet and experienced management team, we appreciate its strong focus on ESG measures, which we believe is a good indicator of the quality of a company’s business model and management team.

Specifically, we appreciate solid governance practices with compensation metrics emphasizing ROCE and relative total shareholder return, the board’s effective oversight of management as well as the company’s methane flaring leadership. COP is investing in field electrification and carbon capture across its portfolio, with ambitions to deliver oil production with a CO2 intensity of sub-5 kg/BOE, which would be one of the lowest emission sources of supply in the world.”

3. Chevron Corporation (NYSE:CVX)

Number of Hedge Fund Holders: 66

PE Ratio as of December 2: 10.17

At the close of the third quarter of 2022, Chevron Corporation (NYSE:CVX) was a part of 66 investors’ portfolios that disclosed stakes worth $27.13 billion in the company. This is compared to 59 hedge funds in the preceding quarter with stakes worth $26 billion. The hedge fund sentiment for the stock is positive. As of September 30, Berkshire Hathaway is the top investor in the company and has a position worth $23.75 billion.

Chevron Corporation (NYSE:CVX) is cash-rich, profitable, and efficient at generating profits for shareholders. According to the company’s balance sheet, Chevron Corporation (NYSE:CVX) has free cash flows of $36.69 billion, a trailing twelve-month operating margin of 16.27%, and an ROE of 23.16%. The company is currently trading cheaply relative to earnings and is placed among the best undervalued energy stocks to buy right now. As of December 2, the stock has a trailing twelve-month PE ratio of 10.17 and has gained 72.90% year to date.

Wall Street sees material upside to Chevron Corporation (NYSE:CVX). On November 22, Citi analyst Alastair Syme raised his price target on Chevron Corporation (NYSE:CVX) to $180 from $155 and maintained a Neutral rating on the shares.

2. Occidental Petroleum Corporation (NYSE:OXY)

Number of Hedge Fund Holders: 74

PE Ratio as of December 2: 5.66

Wall Street is positive on Occidental Petroleum Corporation (NYSE:OXY). On November 14, Wells Fargo analyst Roger Read upgraded Occidental Petroleum Corporation (NYSE:OXY) to Equal Weight from Underweight and raised his price target to $74 from $59. This November, Citi analyst Scott Gruber raised his price target on Occidental Petroleum Corporation (NYSE:OXY) to $75 from $67 and maintained a Neutral rating on the shares.

On November 8, Occidental Petroleum Corporation (NYSE:OXY) reported earnings for the third quarter of fiscal 2022. The company reported an EPS of $2.44 and generated a revenue of $9.50 billion, up 39.41% year over year and ahead of Wall Street consensus by $452.55 million. As of December 2, the stock has returned 119.61% to investors year to date and is trading at a PE multiple of 5x. Occidental Petroleum Corporation (NYSE:OXY) is one of the best undervalued energy stocks to buy now.

At the close of Q3 2022, 74 hedge funds held stakes in Occidental Petroleum Corporation (NYSE:OXY) worth $15.6 billion. This is compared to 66 hedge funds in the previous quarter with positions worth $13.75 billion. The hedge fund sentiment for the stock is positive. As of September 30, Berkshire Hathaway is the dominant investor in the company and has a position worth $11.9 billion.

1. Exxon Mobil Corporation (NYSE:XOM)

Number of Hedge Fund Holders: 75

PE Ratio as of December 2: 8.95

Exxon Mobil Corporation (NYSE:XOM) is placed high on our list of the best undervalued energy stocks to buy now. Exxon Mobil Corporation (NYSE:XOM) is a profitable company with a healthy balance sheet and strong free cash flow. According to the company’s balance sheet, Exxon Mobil Corporation (NYSE:XOM) has free cash flows of $59.58 billion and a trailing twelve-month operating margin of 16.07%. The stock has soared 72.90% year to date, as of December 2, and is trading at a PE multiple of 8x.

Wall Street analysts see material upside to Exxon Mobil Corporation (NYSE:XOM). On November 11, Piper Sandler analyst Ryan Todd raised his price target on Exxon Mobil Corporation (NYSE:XOM) to $131 from $113 and maintained an Overweight rating on the shares. On November 22, Citi analyst Alastair Syme raised his price target on Exxon Mobil Corporation (NYSE:XOM) to $110 from $98 and reiterated a Neutral rating on the shares.

At the end of the third quarter of 2022, Exxon Mobil Corporation (NYSE:XOM) was spotted on 75 investors’ portfolios that held positions worth $5.53 billion in the company. Of those, GQG Partners was the top investor in the company and disclosed a position worth $2.95 billion.

Here is what First Eagle Investments had to say about Exxon Mobil Corporation (NYSE:XOM) in its second-quarter 2022 investor letter:

“Integrated oil and gas giant Exxon Mobil performed well in the second quarter as continued high prices for energy products supported the stock. As the largest refiner in the US, the company has benefitted from wide “crack spreads,” or the margin between the cost of crude oil and the petroleum products extracted from it. Exxon continues to invest in refining capacity in the US, which industrywide has been in steady decline since 2019. We are pleased that Exxon has been using its strong cash flows to reduce debt and to return cash to shareholders through dividends and stock repurchases.”

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