In this article, we discuss the 10 oil and gas stocks to buy according to Phill Gross’s Adage Capital.
Former Harvard endowment executive Phill Gross oversees Boston-based hedge fund firm Adage Capital Management. Gross co-founded the money management firm with Robert Atchinson in 2001. The fund’s assets under management have grown from $3.8 billion since the foundation to $50.7 billion as of September 30, 2021.
The hedge fund holds a diversified portfolio and invests in various industries including technology, healthcare, industrials, financials, utilities, consumer goods, and energy. Phill Gross, who spent 18 years as a healthcare analyst at Harvard Management Company, now manages the healthcare sector at Adage Capital. In this article, we will discuss Gross’s top oil and gas stocks.
Billionaire Phill Gross’s Adage Capital Management focuses on managing S&P 500 assets for endowments and foundations. Some of the biggest oil and gas stocks in Adage Capital’s Q3 2021 portfolio include Exxon Mobil Corporation (NYSE:XOM), ConocoPhillips (NYSE:COP), Pioneer Natural Resources Company (NYSE:PXD), and Chesapeake Energy Corporation (NYSE:CHK).
Phillip Gross of Adage Capital
Our Methodology
We picked these oil and gas stocks from the Q3 portfolio of Phillip Gross’s Adage Capital Management. Insider Monkey’s data on 867 hedge funds were used to gauge hedge fund sentiment toward each stock.
Let’s start our list of the 10 oil and gas stocks to buy according to Phill Gross’s Adage Capital.
Oil and Gas Stocks to Buy According to Phill Gross’s Adage Capital
10. Royal Dutch Shell plc (NYSE:RDS)
Number of Hedge Fund Holders: 33
Royal Dutch Shell plc (NYSE:RDS), an integrated oil and gas company, is one of the oil and gas stocks in billionaire Phill Gross’s portfolio. In addition to the exploration and production of oil and gas, the Netherlands-based energy firm also markets petrochemicals internationally.
In early December, Deutsche Bank analyst James Hubbard maintained a Buy rating on Royal Dutch Shell plc (NYSE:RDS). Hubbard increased his price target for the stock to 2,038 GBP from 1,871 GBP. As of Q3 2021, 33 hedge funds in Insider Monkey’s database reported owning stakes in Royal Dutch Shell plc (NYSE:RDS), compared to 38 in the previous quarter.
Adage Capital Management holds 350,000 shares in Royal Dutch Shell plc (NYSE:RDS) in Q3, worth roughly $15.6 million. The company represented 0.03% of Phill Gross’s portfolio.
Here is what Goehring & Rozencwajg Associates has to say about Royal Dutch Shell plc in its Q3 2021 investor letter:
“Royal Dutch Shell’s ESG challenges continue unabated. A Dutch court ruled in May that Royal Dutch Shell must cut its CO2 output by 45% by 2030 to align their policies with the Paris Climate Accord. In a statement issued after the verdict, a Shell spokesperson acknowledged that “urgent action is needed on climate change and the company is accelerating efforts to reduce emissions.” If the pressure from the Dutch court system was not enough, an activist shareholder has proposed breaking the company apart to address ESG concerns. On October 27th, Third Point Management announced the following.
“If Shell pursues this type of strategy it would probably lead to an acceleration of carbon dioxide reduction. […] Breaking Shell into two operating units would create a standalone legacy energy business (upstream, refining, and chemicals) that could slow capex beyond what is has already promised, sell assets, and prioritize return of cash to shareholder which can be reallocated into low-carbon areas of the market.”
Shell has already cut spending dramatically over the last decade. After having peaked at $39 bn in 2013, upstream capital spending fell to only $17 bn in 2020 – a drop of nearly 60%. Spending has barely recovered in the three quarters of 2021. A lack of spending has already impacted production. Proforma for the 2016 acquisition of BG Group, Shell’s total production has fallen 13% since capital spending peaked in 2013. These trends are accelerating: Shell’s production over the first nine months of 2021 have fallen 7% compared with the same period last year.
If Royal Dutch Shell’s upstream capital spending remains at today’s depressed levels, we estimate the company will only be able to replace 30% of production with new reserves and that production will fall 40% over the next nine years. If spending is further curtailed (as is being proposed), Shell’s oil and natural gas production would collapse – something that may have already started.”
9. Phillips 66 (NYSE:PSX)
Number of Hedge Fund Holders: 34
Phillips 66 (NYSE:PSX) is a diversified energy firm that operates in the refining, midstream, and marketing of crude oil and gas products. In Q3 2021, Phillips 66 (NYSE:PSX) accounted for 0.03% of Adage Capital Management’s total holdings. Although investor Phillip Gross cut his stake in the oil company by 50%, the fund still owns 281,501 shares of the company at the end of the September quarter.
Phillips 66 (NYSE:PSX) has a global refining capacity of 2.2 million barrels of crude oil per day, having 13 refineries in Europe and the United States.
JPMorgan analyst Phil Gresh is bullish on Phillips 66 (NYSE:PSX) as he upgraded the energy company to Overweight from Neutral on December 8. Gresh likes the company’s in-demand Refinery segment. Phil Gresh increased his price target for the stock to $93 from $83.
The number of hedge funds tracked by Insider Monkey having stakes in Phillips 66 (NYSE:PSX) grew to 34 at the end of September 2021, from 26 in the preceding quarter.
8. Antero Resources Corporation (NYSE:AR)
Number of Hedge Fund Holders: 41
At the end of Q3 2021, 41 hedge funds tracked by Insider Monkey reported owning stakes in Antero Resources Corporation (NYSE:AR), down from 33 in the previous quarter. These stakes are valued at over $973 million.
Adage Capital Management re-entered its position in Antero Resources Corporation (NYSE:AR) after removing the oil and gas company’s shares from its holdings in Q4 2014. Phillip Gross spent $19.7 million on over 1.04 million shares of Antero Resources Corporation (NYSE:AR) in the third quarter of 2021.
Oil and gas firm Antero Resources Corporation (NYSE:AR) operates on 542,000 net acres in the southwestern center of the Marcellus and Utica Shales. The Colorado-based company produces 160,000 barrels of natural gas liquids per day and 12,000 barrels of oil per day.
Despite missing analyst revenue expectations in the third quarter, Antero Resources Corporation’s (NYSE:AR) sales rose 40% year over year to $534 million.
Ken Fisher’s Fisher Asset Management was Antero Resources Corporation’s (NYSE:AR) largest shareholder in Q3, with a stake worth $115 million.
Analysts are watching Antero Resources Corporation (NYSE:AR) along with Exxon Mobil Corporation (NYSE:XOM), ConocoPhillips (NYSE:COP), Pioneer Natural Resources Company (NYSE:PXD), and Chesapeake Energy Corporation (NYSE:CHK).
7. Marathon Petroleum Corporation (NYSE:MPC)
Number of Hedge Fund Holders: 43
Marathon Petroleum Corporation (NYSE:MPC) is a downstream energy company that focuses on refining, marketing, and transporting petroleum products. The Ohio-based oil company also offers industrial petroleum-based products such as asphalt and petrochemicals.
In mid-November, Wells Fargo analyst Roger Read expressed optimism about the refining market in the United States in 2022, raising his price target for Marathon Petroleum Corporation (NYSE:MPC) to $87 from $73 while maintaining an Overweight rating on the stock.
Adage Capital Management increased its stake in the company in the third quarter, bringing its total stake to 1.32 million shares. In the third quarter, the oil company represented 0.16% of the fund’s total holdings.
In Q3, 43 hedge funds tracked by Insider Monkey held stakes in Marathon Petroleum Corporation (NYSE:MPC), compared to 48 in the preceding quarter. These stakes hold a value of over $2.68 billion.
6. Chesapeake Energy Corporation (NYSE:CHK)
Number of Hedge Fund Holders: 44
Chesapeake Energy Corporation (NYSE:CHK) has been one of the most successful shale oil producers in recent months, as energy demand has recovered from the pandemic slump and prices have reached multi-year highs. In November, the Oklahoma-based oil and gas company reported third-quarter revenue of $1.17 billion, which was $361 million higher than expected.
Chesapeake Energy Corporation (NYSE:CHK) is among the oil and gas stock picks by Phillip Gross in Q3 2021. Adage Capital Management owned 1.33 million shares of the oil company between the period of June and September. The total value of this stake is $81.9 million.
On December 12, Johnson Rice analyst Charles Meade upgraded his rating on Chesapeake Energy Corporation (NYSE:CHK) to Buy from Accumulate. Meade maintained a $115 price target for the stock.
At the end of Q3 2021, 44 hedge funds in Insider Monkey’s database reported owning stakes in Chesapeake Energy Corporation (NYSE:CHK), up from 43 in the previous quarter. The total value of these stakes is over $2.17 billion.
5. EOG Resources, Inc. (NYSE:EOG)
Number of Hedge Fund Holders: 47
EOG Resources, Inc. (NYSE:EOG), a Texas-based crude oil and natural gas producer, is among the oil and gas stocks in Adage Capital’s portfolio in Q3 2021. In Q3, Adage Capital Management increased its stake in the company by 108% and now holds shares worth over $47.3 million.
As per Insider Monkey’s data for the third quarter, 47 hedge funds were bullish on EOG Resources, Inc. (NYSE:EOG), up from 35 in Q2 2021. The stakes hold a consolidated value of roughly $1.02 billion.
Here is what Madison Funds has to say about EOG Resources, Inc. in its Q3 2021 investor letter:
“EOG is a leading oil and gas exploration and production company with attractive exposure to U.S. shale resources. Its energy mix is ~72% oil and liquid natural gas and 28% natural gas. The company has premium acreage that includes over 10,000 potential drilling locations, which provides a long runway for growth. EOG has a disciplined management team that limits operating expenses and capital spending, which results in high free cash flow, a rarity in the Energy sector….”
4. Pioneer Natural Resources Company (NYSE:PXD)
Number of Hedge Fund Holders: 48
Pioneer Natural Resources Company (NYSE:PXD) is an independent oil and gas company with operations in the Permian Basin. The Texas-based oil company recently received $3.1 billion in proceeds from the sale of Delaware Basin assets to Continental Resources, Inc. (NYSE:CLR).
Phillip Gross increased his stake in Pioneer Natural Resources Company (NYSE:PXD) by 24% in Q3 2021, bringing his total holdings to 1.57 million shares worth $262 million.
At the end of the September quarter, 48 hedge funds tracked by Insider Monkey reported owning stakes in Pioneer Natural Resources Company (NYSE:PXD), up from 45 in the previous quarter.
3. ConocoPhillips (NYSE:COP)
Number of Hedge Fund Holders: 49
ConocoPhillips’s (NYSE:COP) price target was recently upped by Mizuho analysts to $101 from $99 while maintaining a Buy rating on the shares.
Adage Capital Management holds 5.7 million shares of ConocoPhillips (NYSE:COP) in Q3, worth roughly $388 million.
Ken Fisher’s Fisher Asset Management was one of the company’s largest shareholders in Q3, owning a stake worth $403 million.
2. Cheniere Energy, Inc. (NYSE:LNG)
Number of Hedge Fund Holders: 49
Cheniere Energy, Inc. (NYSE:LNG) boasts itself as the largest liquefied natural gas (LNG) producer in the US and the second-largest in the world. The Texas-based gas company transports LNG products nationwide and internationally. Cheniere Energy, Inc. (NYSE:LNG) operates three major pipelines and two terminals in the US.
Cheniere Energy, Inc. (NYSE:LNG) was named Cowen analyst Jason Gabelman’s best idea for 2022. The analyst raised his price target to $130 from $120 while maintaining an Outperform rating on the stock.
Here is what Horizon Kinetics has to say about Cheniere Energy, Inc. (NYSE:LNG) in its Q3 2021 investor letter:
“Cheniere Energy, from this list, shows our time frame approach in action. The share price is up very substantially from when we initially bought it 2 ½ years ago, and it reaches new all-time highs almost monthly. The stock dropped by 50% early last year, and the entire return occurred this year. You might think, ‘Ok, 3 years, excellent performance, that’s it.’ That’s not why we bought it. We bought a certain business model, a value development pattern on a massive dormant asset, and a valuation discount.
We bought Cheniere because it was exceedingly cheap as it transitioned from a development stage operating company stage, having just turned profitable a year after completing its basic plant construction and selling its first shipload of liquified natural gas (LNG): 2017 loss of $(390) million vs. 2018 earnings of $470 million…” (Click here to see the full text)
1. Exxon Mobil Corporation (NYSE:XOM)
Number of Hedge Fund Holders: 64
Adage Capital Management increased its stake in Exxon Mobil Corporation (NYSE:XOM) by 34% in Q3 2021. The company accounted for 1% of Phill Gross’s portfolio.
Exxon Mobil Corporation (NYSE:XOM) is one of the top options for income investors because it is one of the stable and reliable dividend aristocrats in history. In the last 39 years, the Texas-based company has increased its annual payouts, and it now pays its shareholders an annual dividend of $3.52 per share.
Overall, 64 funds of the 867 elite funds tracked by Insider Monkey reported owning stakes Exxon Mobil Corporation (NYSE:XOM) at the end of September 2021. Florida-based investment firm GQG Partners is the largest shareholder of the company with a total stake of $1.56 billion.
Here is what Goehring & Rozencwajg Associates has to say about Exxon Mobil Corporation in its Q3 2021 investor letter:
“After successfully replacing 25% of Exxon’s board of directors despite owning just 0.02% of the outstanding equity, Engine No. 1, the climate-focused activist hedge fund, met with Chevron’s management late last summer. In discussions that were later described as “cordial,” Chevron executives shared their plan to reduce carbon emissions. Subsequently, Chevron announced new plans to further reduce carbon output, along with their intention to appoint a new director with “environmental expertise.” Although it remains unclear exactly what Engine No. 1 is planning, rumors suggest the fund has contacted other investors, strongly suggesting they intend to launch a second campaign in the not-too-distant future.
What should Chevron expect?
It was recently reported by The Wall Street Journal that Exxon was considering abandoning two massive natural gas projects: the 75 trillion cubic foot (tcf ) Rovuma LNG project (capital cost $30 bn) and the 5 tcf Ca Voi Xanh offshore-Vietnam gas project (capital cost $10 bn). Exxon board members (most likely including the three supported by Engine No. 1) have publically expressed concerns about both projects.
According to internal reports, these projects are among the highest CO2 producers in Exxon’s pipeline; it is no surprise these projects have been called into question. However, we find the plight of both fields to be perplexing since the production would almost certainly be used to displace coal in electricity generation, cutting CO2 emissions by nearly 50%. This fact seems to be lost on the new Exxon board members.”
You can also take a peek at Billionaire Philippe Laffont is Selling These 10 Stocks and 10 Dividend Stock Picks of Ira Unschuld’s Brant Point Investment.
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Disclosure. None. 10 Oil and Gas Stocks to Buy According to Phill Gross’s Adage Capital is originally published on Insider Monkey.
