5 Stocks Hedge Funds Are Investing In

4. National Fuel Gas Company (NYSE:NFG)

Number of hedge fund holdings at the end of Q3: 23

2024 Return: 6.8%

Incorporated in 1902, National Fuel Gas Company (NYSE:NFG) is a diversified energy company headquartered in Williamsville, New York. The company engages in the exploration, production, transportation storage and distribution of natural gas and oil.  National Fuel Gas Company (NYSE:NFG) is well positioned to withstand economic volatility and its strong track record makes it a preferred stock among investors.

Heartland Value Fund made the following comment about National Fuel Gas Company (NYSE:NFG) in its Q3 2023 investor letter:

“Utilities. National Fuel Gas (NYSE:NFG) is another existing holding we added to in the quarter. NFG is an energy company, with regulated utility assets, involved in the production, transportation, and distribution of natural gas. The stock’s correlation with natural gas prices has been high, so it wasn’t too surprising when the stock fell as natural gas prices declined following last year’s benign winter.

But prices are expected to rebound in the coming months now that the supply issue has been addressed with the steep drop in oil gas rig counts. Demand is also set to improve starting in 2025 with the onset of more U.S. liquefied natural gas (LNG) exports. Meanwhile, this is a well-run business with a track record of financial soundness. NFG, for instance, has raised dividends for 53 consecutive years because of the consistent cash flow generation from its midstream and utility segments.

Yet, when looking at valuations, we see a disconnect. NFG is trading at a 20% discount to its historical valuations compared with traditional oil and gas exploration and production stocks. The relative premium it typically garners is a function of the company’s ability to leverage its pipeline infrastructure to capitalize on higher natural gas prices and the stability of non-energy cash flows. We are positioning the portfolio to take advantage of this opportunity.”

NFG had flat revenues in 2023 compared to 2022, its stock price has gone nowhere in the last 5 years, and its stock price is trading at a forward multiple of 10. This is a perfect stock for a dividend investor, currently yielding 3.7%.