In this article, we will be taking a look at the 10 energy stocks to buy before winter.
In February 2022, the Russian Federation invaded Ukraine, leading to an ongoing global crisis of pandemic proportions. The invasion and resulting war have since become a cause for concern in all areas, including the global markets. According to the World Bank, as cited by the Guardian, the war will lead to rising food and energy prices over the next three years, returning the world to a state of high inflation that rivals the 1970s. The World Bank forecasts a 50% increase in energy prices in 2022, directly caused by the Russian invasion. Brent crude oil is expected to average about $100 a barrel this year, showcasing an over 40% increase compared to the price in 2021. Energy costs may thus continue skyrocketing, especially this winter.
While the significant increase in energy prices is no cause to celebrate for the average person, major energy companies like Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and Devon Energy Corporation (NYSE:DVN) are set to benefit from these developments. As of this July, the S&P 500 energy sector remained one of the few sectors to flourish this year, being up 20% year-to-date, according to Reuters. In comparison, the broader benchmark index has fallen by 19.8% year-to-date. The pandemic also added to a surge in oil prices, bringing the price of U.S. crude oil up to $130 per barrel in March. The Russo-Ukrainian war has since added fuel to the fire by further tightening the energy market. Energy stocks have thus become a top investment option for many investors looking to lock in gains.
According to the Wall Street Journal earlier this year, 17 out of the 25 best-performing stocks in the S&P 500 in 2022 were from the energy sector. While the rest of the market was floundering this year, investors began eyeing energy stocks for better returns and dividends. The energy sector’s 2.9% dividend yield, when compared to the 1.3% yield of the S&P 500 as a whole, has further increased the sector’s popularity. As such, now seems the best time to begin investing in energy stocks before prices skyrocket again this winter. With that in mind, let’s take a look at the 10 energy stocks to buy before winter.
Photo by Jason Blackeye on Unsplash
Our Methodology
We have selected some of the top names in the energy sector for our list below, based on their popularity among the 895 hedge funds Insider Monkey tracks that filed 13Fs for the second quarter. The stocks are ranked based on the number of hedge funds holding stakes in them, from the lowest to the highest. We have also mentioned several key metrics that often signal positive or negative stock performance, such as the companies’ latest earnings results, their growth potential over the next three to five years, and the analyst ratings and price targets on their shares.
Energy Stocks to Buy Before Winter
10. TotalEnergies SE (NYSE:TTE)
Number of Hedge Fund Holders: 20
TotalEnergies SE (NYSE:TTE) is an integrated oil and gas company operating worldwide. The company operates through its Integrated Gas, Renewables & Power, Exploration & Production, Refining & Chemicals, and Marketing & Services segments. It is engaged in liquefied natural gas production, shipping, trading, and regasification activities, among others. An ‘Outperformer’ rating was reiterated on TotalEnergies SE (NYSE:TTE) shares on August 10, by BMO Capital’s John Gibson.
This July, TotalEnergies SE’s (NYSE:TTE) second-quarter profit surged after the company sold a 50% stake in its fuel distribution business in Egypt. The sale totaled $186 million with an additional contingency payment of about $17.3 million. TotalEnergies SE’s (NYSE:TTE) net profit for the second quarter rose 2.6x as a result, to about $5.7 billion. Its revenue also jumped by 59% to $74.8 billion. The company also raised its dividend by 5% year-over-year, and its second-quarter net cash flow came in at $8.3 billion.
There were 20 hedge funds long TotalEnergies SE (NYSE:TTE) in the second quarter, with a total stake value of $1.9 billion. Of those hedge funds, Fisher Asset Management was the largest stakeholder in the company, holding 26.9 million shares worth $1.4 billion.
TotalEnergies SE (NYSE:TTE), like Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and Devon Energy Corporation (NYSE:DVN), is among the most renowned energy stocks hedge funds are eyeing today.
9. Enbridge Inc. (NYSE:ENB)
Number of Hedge Fund Holders: 25
Enbridge Inc. (NYSE:ENB) is an oil and gas storage and transportation company. It operates through its Liquids, Pipelines, Gas Transmission and Midstream, Gas Distribution and Storage, Renewable Power Generation, and Energy Services segments. The company operates pipelines and related terminals for the transportation of various grades of crude oil and other liquid hydrocarbons in Canada and the U.S. On August 2, Michael Shaw, an analyst at Raymond James, reiterated a ‘Market Perform’ rating on Enbridge Inc. (NYSE:ENB) shares.
This month, Enbridge Inc. (NYSE:ENB) completed a joint venture merger with Phillips 66. The company believes the move will increase its distributable cash flow per share, and lead to a $400 million cash payment to the company. Enbridge Inc.’s (NYSE:ENB) $10.3 billion in revenue during the second quarter also showed growth of 17.6% year-over-year, and beat estimates by $711 million.
In the second quarter of 2022, 25 hedge funds held stakes in Enbridge Inc. (NYSE:ENB), with a total stake value of $2.4 billion. In comparison, 24 hedge funds were long the stock in the previous quarter, with a total stake value of $2.3 billion.
8. BP plc (NYSE:BP)
Number of Hedge Fund Holders: 27
BP plc (NYSE:BP) is an integrated oil and gas energy company based in London, UK. The company operates through its Gas & Low Carbon Energy, Oil Production & Operations, Customers & Products, and Rosneft segments. It produces and trades in natural gas, while also offering biofuels and operating onshore and offshore wind power, among other services. Morgan Stanley analyst Martjin Rats holds an ‘Overweight’ rating on BP plc (NYSE:BP) shares as of August 23.
In the second quarter, BP plc (NYSE:BP) had EPS of $2.61, beating estimates by $0.48. The company’s revenue was $67.9 billion, up 86.1% year-over-year and also beating estimates by $7 billion. The company’s EPS is expected to grow by a further 2% over the next three to five years.
Arrowstreet Capital was the largest stakeholder in BP plc (NYSE:BP) as of the close of the second quarter, when a total of 27 hedge funds were long the stock. The fund held 26.5 million shares in the company, worth $750 million.
Just like Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and Devon Energy Corporation (NYSE:DVN), BP plc (NYSE:BP) is an energy stock to invest in before this winter.
7. Coterra Energy Inc. (NYSE:CTRA)
Number of Hedge Fund Holders: 40
Coterra Energy Inc. (NYSE:CTRA) is an independent oil and gas company working to develop, explore, and produce oil, natural gas, and natural gas liquids. The company operates primarily in the U.S. and focuses on the Marcellus Shale. It has about 177,000 net acres in the dry gas window of the play in Susquehanna County, Pennsylvania.
Mizuho’s analyst Vincent Lovaglio holds a ‘Buy’ rating on Coterra Energy Inc.’s (NYSE:CTRA) shares as of August 23. The analyst also raised his price target on the shares from $40 to $43.
Coterra Energy Inc.’s (NYSE:CTRA) EPS in the second quarter of 2022 was $1.35, beating estimates by $0.12. Its revenue was $2.6 billion, up 692% year-over-year and beating estimates by $361 million. Coterra Energy Inc.’s (NYSE:CTRA) EPS is expected to grow by 55% over the next three to five years, while its one-year dividend growth rate currently stands at 283%.
Out of the 895 hedge funds tracked in the second quarter that filed 13Fs, 40 funds were long Coterra Energy Inc. (NYSE:CTRA), while 39 funds were long the stock in the previous quarter. Their total stake values were $437 million and $552 million respectively.
6. Valero Energy Corporation (NYSE:VLO)
Number of Hedge Fund Holders: 43
Valero Energy Corporation (NYSE:VLO) is an oil and gas refining and marketing company. It manufactures, markets, and sells transportation fuels and petrochemical products in the U.S., Canada, the UK, Ireland, and internationally. The company operates through its Refining, Renewable Diesel, and Ethanol segments.
Theresa Chen at Barclays reiterated an ‘Overweight’ rating on Valero Energy Corporation (NYSE:VLO) shares on August 16. Chen also raised her price target on the stock from $133 to $139.
Valero Energy Corporation’s (NYSE:VLO) second-quarter net income attributable to shareholders jumped to a record of $4.7 billion. That represented a significant rise year-over-year, given that net income was just $162 million in the year-ago quarter. The company’s revenue also nearly doubled year-over-year during the latest quarter, to $51.6 billion. Valero Energy Corporation’s (NYSE:VLO) stock price return stood at a 58% gain year-to-date and an 87% gain across the past year, as of August 24.
Our hedge fund data for the second quarter shows 43 hedge funds long Valero Energy Corporation (NYSE:VLO), with a total stake value of $760 million. Millennium Management was the largest stakeholder in the company, holding 1.89 million shares worth $201 million.
Valero Energy Corporation (NYSE:VLO), like Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and Devon Energy Corporation (NYSE:DVN) is set to skyrocket when demand for energy sources rises in the winter.
5. Devon Energy Corporation (NYSE:DVN)
Number of Hedge Fund Holders: 57
Devon Energy Corporation (NYSE:DVN) is an independent energy company. It is engaged in the exploration, development, and production of oil, natural gas, and natural gas liquids. The company is based in Oklahoma City. On August 23, Vincent Lovaglio at Mizuho raised his price target on Devon Energy Corporation (NYSE:DVN) shares from $88 to $91. The analyst also reiterated a ‘Buy’ rating on the stock.
Earlier this month, Devon Energy Corporation (NYSE:DVN) raised its 2022 production guidance by 3% in light of year-to-date production performance surpassing expectations. Devon Energy Corporation (NYSE:DVN) also announced a 22% dividend increase for its shareholders, bringing the company’s dividend up to $1.55 per share, compared to the previous value of $1.27. The company’s stock price return shows a 36% gain year-to-date and a 150% increase over the past year.
As of the close of the second quarter, 57 hedge funds were long Devon Energy Corporation (NYSE:DVN), with a total stake value of $1.5 billion.
4. Chevron Corporation (NYSE:CVX)
Number of Hedge Fund Holders: 59
Chevron Corporation (NYSE:CVX) is an energy company that engages in integrated energy and chemicals operations worldwide, through its subsidiaries. It operates through its Upstream and Downstream segments, and is based in San Ramon, California.
Phillip Jungwirth, an analyst at BMO Capital, reiterated an ‘Outperform’ rating on Chevron Corporation (NYSE:CVX) shares on August 23. The analyst also holds a $180 price target on the stock.
Chevron Corporation (NYSE:CVX) had EPS of $5.82 in the second quarter, beating estimates by $0.70. The company’s revenue was $68.8 billion, also beating estimates by $11.1 billion. Over the next three to five years, Chevron Corporation’s (NYSE:CVX) EPS is expected to rise by 13.1%.
There were 59 hedge funds long Chevron Corporation (NYSE:CVX) in the second quarter, compared to 53 hedge funds in the previous quarter. Their total stake values were $26 billion and $27.9 billion respectively.
3. Occidental Petroleum Corporation (NYSE:OXY)
Number of Hedge Fund Holders: 66
Occidental Petroleum Corporation (NYSE:OXY) is an integrated oil and gas company that acquires, explores, and develops oil and gas properties. The company operates in the U.S., the Middle East, Africa, and Latin America. An ‘Overweight’ rating was reiterated on Occidental Petroleum Corporation (NYSE:OXY) shares on July 26 by Barclays analyst Jeanine Wai. The analyst also holds a $79 price target on the stock.
Occidental Petroleum Corporation (NYSE:OXY) has been benefiting due to billionaire Warren Buffett’s prolonged interest in the company. Recently, Buffett’s request to accumulate a 50% stake in the company was approved by the Federal Energy Regulatory Commission, leading the stock to rise by almost 10%. As of this August, Berkshire Hathaway holds a 20.2% stake in the company.
Out of 895 hedge funds tracked by Insider Monkey’s database, 66 were long Occidental Petroleum Corporation (NYSE:OXY) in the second quarter. Their total stake value was $13.8 billion.
Smead Capital Management, an investment management company, mentioned Occidental Petroleum Corporation (NYSE:OXY) in its second quarter 2022 investor letter. Here’s what it said:
“For the quarter, our best-performing stocks were Continental Resources (CLR), Merck (MRK) and Occidental Petroleum Corporation (NYSE:OXY). Despite a steep sell-off in June in the oil and gas stocks, two of our oil stocks made the quarterly list.
If you are wondering how we are outperforming the S&P 500 Index in the first half of the year, look no further than our top three performers. Occidental Petroleum (OXY), Continental Resources (CLR) and Conoco Phillips (COP) soared in value and were barely represented in the S&P 500 Index. To quote Jerry Jones, owner of the Dallas Cowboys, “We are in the first quarter on higher energy prices!””
2. ConocoPhillips (NYSE:COP)
Number of Hedge Fund Holders: 71
ConocoPhillips (NYSE:COP) explores for, produces, transports, and markets crude oil, bitumen, natural gas, and more across the globe. The company is based in Houston, Texas.
A ‘Buy’ rating was reiterated on ConocoPhillips (NYSE:COP) shares on August 23 by analyst Vincent Lovaglio at Mizuho. The analyst also holds a $138 price target on the stock.
In August, ConocoPhillips (NYSE:COP) added $5 billion to its planned shareholder returns for 2022, bringing the total value up to $15 billion. The move came in light of rising energy prices. The company’s net income in the second quarter also rose to $5.1 billion, much higher than the $2.1 billion figure brought in during the year-earlier quarter.
ConocoPhillips (NYSE:COP) had the investment backing of 71 hedge funds in the second quarter, compared to 67 hedge funds in the previous quarter. Their total stake values were $2.4 billion and $2.6 billion respectively.
Diamond Hill Capital, an investment management firm, mentioned ConocoPhillips (NYSE:COP) in its first quarter 2022 investor letter. Here’s what the firm said:
“We redeployed capital into ConocoPhillips (NYSE:COP), which was trading at a discount to our estimate of intrinsic value and is well positioned over the long run due to its low-risk asset base.”
1. Exxon Mobil Corporation (NYSE:XOM)
Number of Hedge Fund Holders: 72
Exxon Mobil Corporation (NYSE:XOM) is an energy company that explores for and produces crude oil and natural gas in the U.S. and internationally. The company operates through its Upstream, Downstream, and Chemical segments.
William Janela, an analyst at Credit Suisse, assumed coverage of Exxon Mobil Corporation (NYSE:XOM) shares on August 10 with an ‘Outperform’ rating. The analyst holds a price target of $125 on the stock.
Exxon Mobil Corporation (NYSE:XOM) delivered EPS of $4.14 in the second quarter, and revenue of $116 billion. Both beat estimates, by $0.40 and $3.6 billion respectively. The company’s EPS is expected to grow by 1.3% over the next three to five years, and it currently has a one-year dividend growth rate of 0.9%.
In the second quarter of 2022, 72 hedge funds were long Exxon Mobil Corporation (NYSE:XOM)., with a total stake value of $7.4 billion.
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Disclosure: None. 10 Energy Stocks to Buy Before Winter is originally published on Insider Monkey.
