10 Most Undervalued Oil Stocks To Buy According To Hedge Funds

Published December 6, 2023 at 10:10 am EST Updated August 19, 2026 at 11:10 am EDT

In this article, we discuss the 10 most undervalued oil stocks to buy according to hedge funds.

During the stock market bloodbath of 2022, oil stocks emerged as one of the few success stories. Despite the negative impact of inflation on consumer spending and business sentiment, the price of crude oil experienced positive effects. Moreover, the geopolitical events, particularly Russia’s invasion of Ukraine, further contributed to the strong performance of oil stocks, leading to significant gains even amid the S&P 500 index’s approximate 20% loss for the year. However, the narrative took a turn in 2023 as crude oil prices saw a substantial decline, nearly halving from their 2022 peak of around $120 per barrel.

Following the unexpected attack on Israel on October 7, there has been a recent surge in geopolitical tensions in the Middle East, a region responsible for over a third of the world’s seaborne oil trade. This development has put financial markets on edge. Traders quickly factored in a risk premium of $3-4 per barrel as markets opened. Although oil prices have somewhat stabilized since then, with Brent futures trading at approximately $78.2 per barrel, the ongoing crisis continues to keep markets in a state of anticipation. While there hasn’t been a direct impact on the physical oil supply, observers are closely monitoring the situation as it unfolds. TD Asset Management suggests that if the conflict remains localized, oil prices may stay relatively conservative. However, if other countries become involved, there is a potential for prices to reach $120 per barrel or even spike to $150.

At the beginning of 2023, there were concerns among oil and gas experts regarding a potential market slowdown due to recession fears and a decline in economic activity in China. However, as the year advanced, these concerns diminished, and data from China also turned positive. According to a September report by the research firm Wood Mackenzie, 2023 is expected to continue the trend of robust recovery following the impact of COVID-19. The firm forecasts a notable increase of 2.0 million barrels per day in global oil demand for the year, slightly below the figures seen in 2022. Wood Mackenzie emphasized that, despite uncertainties in growth, China is poised to play a significant role in this expansion, recovering from the extensive pandemic-related lockdowns of the previous year. At present, global demand has surged to a new record high, surpassing 102 million barrels per day.

On the other hand, over the long term, the International Energy Agency (IEA) envisions a 25% reduction in fossil fuel demand by 2030 and an 80% decrease by 2050. According to a report from the Institute of Energy Economics and Financial Analysis, the decline of the oil and gas sector has been gradual, noting that it represented approximately 29% of the S&P 500 in 1980 and has now dwindled to 5.3%.

In any case, the oil and gas sector has been on the forefront of the stock market in terms of activity. In light of this, we will look at some of the most undervalued oil stocks in this article. Some notable names include the likes of Chevron Corporation (NYSE:CVX), Exxon Mobil Corporation (NYSE:XOM), and Chesapeake Energy Corporation (NASDAQ:CHK).

An oil derrick silhouetted against a rising sun with a blue sky in the background.

Our Methodology

In compiling our selection of the most undervalued oil stocks to consider, we surveyed Insider Monkey’s database of 910 hedge funds. We identified 10 stocks operating in the oil and gas sector with PE ratios below 15 and the highest hedge fund investor interest. The stocks are arranged in ascending order according to hedge fund sentiment.

10. BP p.l.c. (NYSE:BP)

Number of Hedge Fund Holders: 35

P/E Ratio as of December 5: 4.21

BP p.l.c. (NYSE:BP), a British multinational oil and gas company based in London, England, stands as one of the oil and gas “supermajors” and is among the world’s largest companies in terms of revenues and profits. On November 6, Morgan Stanley analyst Martijn Rats upheld an Overweight rating on BP p.l.c. (NYSE:BP) shares, albeit with a reduced price target of 610 GBp from the previous 700 GBp.

Recently, BP p.l.c (NYSE:BP) has made a significant move in its transition strategy, agreeing to acquire the remaining 50.03% stake in the solar power developer Lightsource BP. Former CEO Bernard Looney’s vision is evidently influencing this decision. The initial payment for this acquisition amounts to £254 million, with potential additional payments contingent on the company’s performance and the divestment of identified assets.

As of the close of Q3 2023, 35 hedge funds tracked by Insider Monkey reported having stakes in BP p.l.c. (NYSE:BP), compared with 36 in the preceding quarter. The collective value of these stakes is more than $2.05 billion.

Much like Chevron Corporation, Exxon Mobil Corporation, and Chesapeake Energy Corporation, BP p.l.c. (NYSE:BP) is an undervalued oil stock that hedge funds are interested in.

9. Halliburton Company (NYSE:HAL)

Number of Hedge Fund Holders: 41

P/E Ratio as of December 5: 12.63

Halliburton Company (NYSE:HAL) operates as an oilfield service provider, specializing in serving the upstream oil and gas sector throughout the entire reservoir lifecycle. The company offers a comprehensive range of services, including activities spanning hydrocarbon discovery, geological data management, drilling, formation assessment, well construction, completion, and production optimization.

Citigroup raised the stock target for Halliburton Company on October 4, adjusting it from $42.00 to $46.00, aligning with analyst Scott Gruber’s positive outlook on future earnings and operational efficiency. Gruber’s “Buy” rating is based on the expectation that Halliburton’s investments in electronic fracking, coupled with effective execution, will result in market share growth and improvements in Completion and Production (C&P) margins.

Insider Monkey’s analysis of the third quarter 2023 investment activities of 910 hedge funds revealed 41 funds with investments in Halliburton Company. The leading shareholder in Insider Monkey’s database is Pzena Investment Management, managed by Richard S. Pzena, holding 3.56 million shares valued at $144.49 million.

Carillon Eagle Mid Cap Growth Fund made the following comment about Halliburton Company in its Q3 2023 investor letter:

“Halliburton Company (NYSE:HAL) provides equipment and services to the global energy industry. The stock was an impressive outperformer in the quarter, as the recent sharp increase in oil prices should translate to healthy levels of North American shale activity in the remainder of the year and into 2024. Halliburton also is poised to benefit from the ongoing multi-year international and offshore upstream investment cycle.”

8. Valero Energy Corporation (NYSE:VLO)

Number of Hedge Fund Holders: 44

P/E Ratio as of December 5: 4.39

Valero Energy Corporation (NYSE:VLO), headquartered in San Antonio, Texas, is an American-based downstream petroleum company primarily engaged in the manufacturing and marketing of transportation fuels, along with other petrochemical products and power.

Valero Energy Corporation exceeded third-quarter profit expectations on October 26, driven by persistent demand for fuel and refined products amid tight supplies. The company reported that throughput volumes averaged 3 million barrels per day in the quarter, remaining steady compared to the previous year but surpassing the Street’s estimate of 2.96 million bpd. For the present quarter, Valero anticipates refining throughput to range between 2.93 million and 3.04 million bpd.

44 hedge funds out of the 910 part of Insider Monkey’s Q3 2023 research had held a stake in the company. Valero Energy Corporation’s largest investor in our database is Cliff Asness’ AQR Capital Management as it owns $287.09 million worth of shares.

7. Chesapeake Energy Corporation (NASDAQ:CHK)

Number of Hedge Fund Holders: 45

P/E Ratio as of December 5: 2.11

Established in 1989, Chesapeake Energy Corporation specializes in the exploration and responsible development of key assets within three prominent U.S. oil and gas regions: the Eagle Ford, Haynesville, and Marcellus Shales. Headquartered in Oklahoma City, a major hub for the natural gas and oil industry, the company achieved a daily production rate of around 4.0 billion cubic feet equivalent (bcfe) per day throughout 2022.

Chesapeake Energy Corporation is currently in the early stages of contemplating the acquisition of its fellow gas industry counterpart, Southwestern Energy, valued at over $8 billion. Initial discussions between Chesapeake and Southwestern were reported by Reuters on October 17. If a merger between the two companies materializes, they would surpass EQT Corporation, becoming the largest exploration and production enterprise focused on natural gas in the United States, measured by market value.

As of the end of the third quarter of this year, Insider Monkey’s survey of 910 hedge funds identified 45 that had invested in Chesapeake Energy Corporation. The largest stakeholder among these is Oaktree Capital Management, led by Howard Marks, with holdings valued at $603.6 million.

6. Marathon Petroleum Corporation (NYSE:MPC)

Number of Hedge Fund Holders: 48

P/E Ratio as of December 5: 5.69

Marathon Petroleum Corporation (NYSE:MPC) is a U.S.-based company primarily engaged in petroleum refining, marketing, and transportation, with its headquarters located in Findlay, Ohio. Formerly a wholly-owned subsidiary of Marathon Oil until a corporate spin-off in 2011, the company boasts a position as one of the world’s largest pipeline companies, operating a network of nearly 14,000 miles.

On October 25, Marathon Petroleum Corporation declared a dividend of $0.825 per share on common stock, signaling approximately a 10% growth compared to its previous dividend of $0.75 per share. The dividend is scheduled for distribution on December 11, 2023, to shareholders on record as of November 16, 2023. Additionally, MPC recently approved an additional $5 billion share repurchase authorization, supplementing its existing authorization, which had roughly $4.3 billion remaining as of September 30.

In the third quarter of 2023, the company featured in 48 hedge fund portfolios, an increase from 42 in the previous quarter. Paul Singer’s Elliott Management emerged as the largest stakeholder of Marathon Petroleum Corporation in Q3, holding over 11 million shares valued at approximately $1.67 billion.

In addition to Chevron Corporation, Exxon Mobil Corporation, and Chesapeake Energy Corporation, Marathon Petroleum Corporation is an undervalued stock investors should pay attention to.

5. Devon Energy Corporation (NYSE:DVN)

Number of Hedge Fund Holders: 52

P/E Ratio as of December 5: 7.62

Devon Energy Corporation (NYSE:DVN) primarily engages in hydrocarbon exploration in the United States, registered in Delaware, and headquartered at the Devon Energy Center, a 50-story skyscraper in Oklahoma City, Oklahoma. In the second quarter, the company generated over $1.4 billion in operating cash flow and allocated $690 million to shareholders through dividends and stock buybacks.

On November 27, Stifel decreased the price target on Devon Energy Corporation’s stock to $77 from $79 and maintained a Buy rating on the shares.

Among the 910 hedge funds monitored by Insider Monkey, 52 of them held stakes in Devon Energy Corporation. The largest stake in Devon Energy Corporation was held by Donald Yacktman’s Yacktman Asset Management, which possesses a $145.2 million stake in the company.

4. ConocoPhillips (NYSE:COP)

Number of Hedge Fund Holders: 62

P/E Ratio as of December 5: 12.53

Houston-based ConocoPhillips (NYSE:COP) is an independent exploration and production (E&P) company involved in the global exploration, production, transportation, and marketing of crude oil, bitumen, natural gas, natural gas liquids, and liquefied natural gas.

In a successful move earlier this October, ConocoPhillips completed the acquisition of the remaining 50% stake in the Surmont oil sands project from TotalEnergies EP Canada Ltd. The deal, valued at approximately $2.7 billion in cash (equivalent to CAD 3.7 billion), also includes potential future contingent payments of around $0.3 billion (equivalent to CAD 0.4 billion). This transaction grants ConocoPhillips full ownership, holding a 100% stake in Surmont, and maintains its position as the project’s operator.

As of the third quarter of 2023, a total of 62 hedge funds, tracked by Insider Monkey, had stakes in ConocoPhillips. The largest stakeholder, with a $1.5 billion investment in the company, was Natixis Global Asset Management’s Harris Associates.

Oakmark Select Fund made the following comment about ConocoPhillips in its second quarter 2023 investor letter:

“ConocoPhillips is one of the largest and most efficient exploration and production companies in the country. The company has an extensive resource base of high-quality drilling inventory in the U.S. and various international locations as well as a growing liquified natural gas business. In our view, the depth and quality of ConocoPhillips’s inventory is a competitive differentiator that is not fully captured in today’s share price. Over the next 10 years, we believe ConocoPhillips will be able to return more than 100% of its current market cap to shareholders via dividends and share repurchases while growing its production at a mid-single-digit annual pace. We believe ConocoPhillips is also among the best managed companies in the oil and gas industry and we are impressed by its history of accretive capital allocation under CEO Ryan Lance. The stock has meaningfully underperformed the broader market year-to-date and is an attractive addition to our portfolio.”

3. Chevron Corporation (NYSE:CVX)

Number of Hedge Fund Holders: 72

P/E Ratio as of December 5: 10.70

Chevron Corporation is a prominent American multinational energy company primarily focused on the oil and gas industry. Originally established as the Standard Oil Company of California and emerging as the second-largest direct descendant of Standard Oil, Chevron has its headquarters in San Ramon, California, and operates across over 180 countries worldwide.

On October 23, Chevron Corporation announced a definitive agreement with Hess Corporation for an all-stock transaction valued at $53 billion. Under this agreement, Chevron will acquire all outstanding shares of Hess. The acquisition is expected to enhance and broaden Chevron’s portfolio, with a particular emphasis on the Stabroek block in Guyana, described as an “exceptional” asset offering industry-leading cash margins and a low carbon footprint, promising continued production growth into the next decade.

By the end of this year’s third quarter, 72 out of the 910 hedge funds part of Insider Monkey’s database had held a stake in Chevron Corporation. Out of these, the firm’s biggest investor is Warren Buffett’s Berkshire Hathaway since it owns 110.24 million shares that are worth $18.59 billion.

The London Company Large Cap Strategy made the following comment about Chevron Corporation in its first quarter 2023 investor letter:

“Initiated: Chevron Corporation – CVX is an integrated energy and chemical producer. Its upstream segment explores for, produces, processes and transfers energy products. Its downstream segment refines and markets these products in addition to industrial plastics and fuel and lubricant additives. Among the major oil companies, CVX is the most levered to oil and gas production; it has one of the most successful exploration programs and among the best production profiles. CVX also has less exposure to the downstream business, which provides an above-peer operating margin profile and supports CVX’s return on invested capital. CVX has one of the strongest balance sheets in the oil industry with net debt/EBITDA of just 0.1x. The combination of its low cost positioning and strong balance sheet gives us greater confidence in downside protection despite its ties to a volatile commodity. We’re attracted to management’s rational approach to capital allocation, with consideration for the full cycle. In terms of capital allocation, CVX just announced a $75B share repurchase plan, and it pays a healthy 3.5% dividend. We have owned CVX in the past and it is the only Energy exposure in the Large Cap portfolio.”

2. Occidental Petroleum Corporation (NYSE:OXY)

Number of Hedge Fund Holders: 75

P/E Ratio as of December 5: 12.63

Occidental Petroleum Corporation (NYSE:OXY) is an American company specializing in hydrocarbon exploration within the United States and the Middle East. Additionally, the company engages in petrochemical manufacturing activities across various locations, including the United States, Canada, and Chile. Organized in Delaware, Occidental Petroleum Corporation has its headquarters situated in Houston.

Occidental Petroleum Corporation is reportedly in negotiations to acquire shale driller CrownRock LP, according to the Wall Street Journal. This move is part of the ongoing consolidation trend in North America’s most prolific oil field. The potential deal for CrownRock is anticipated to have a value exceeding $10 billion, including debt, and might materialize in the near future, as per sources familiar with the matter cited by the newspaper.

A total of 75 hedge funds out of the 910 hedge funds tracked by Insider Monkey had stakes in Occidental Petroleum. The biggest stakeholder of the company was Warren Buffett’s Berkshire Hathaway which had a $13.2 billion stake in the company.

1. Exxon Mobil Corporation (NYSE:XOM)

Number of Hedge Fund Holders: 79

P/E Ratio as of December 5: 10.08

Exxon Mobil Corporation, a prominent American energy company, is a top pick for investment during bear markets. With a lineage tracing back to John D. Rockefeller’s Standard Oil, Exxon Mobil Corporation has undergone a remarkable transformation spanning 140 years. Originating as a local kerosene distributor in the United States, it has grown into a global giant, ranking among the foremost publicly traded entities in the petroleum and petrochemical sectors. Over the past five years, Exxon Mobil Corporation has experienced significant growth of around 30%, consistently increasing dividends for an impressive 39-year streak.

On October 11, Exxon Mobil Corporation and Pioneer Natural Resources (NYSE:PXD) jointly unveiled a firm agreement detailing Exxon Mobil Corporation’s acquisition of Pioneer. This merger is structured as an all-stock transaction with a total valuation of $59.5 billion, equivalent to $253 per share based on ExxonMobil’s closing price on October 5, 2023. As per the agreement’s stipulations, Pioneer shareholders will receive 2.3234 shares of XOM for each PXD share upon completion. The overall enterprise value of this transaction, accounting for net debt, approximates $64.5 billion.

By the end of Q3 2023, data from Insider Monkey’s database revealed that 79 hedge funds had positions in Exxon Mobil Corporation, an decrease from the 71 hedge funds in the previous quarter. The combined value of these holdings exceeds $4.48 billion.

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