We recently compiled a list of the 12 Hot Oil Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Baker Hughes Company (NASDAQ:BKR) stands against the other hot oil stocks.

The United States of America is currently producing more oil and gas than any other country in the history of the world, with no signs of a slowdown. The country’s oil production has surged by almost 50% in the last ten years, reaching just over 13.45 million barrels per day in October 2024.

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These numbers could now pump even higher after President Donald Trump has held up the oil industry as a centerpiece of his broader economic mission, with claims that ‘we will drill, baby, drill’. The president has also signed executive orders declaring a national energy emergency and withdrawing from the landmark 2015 Paris climate agreement, the international pact to fight global warming. Trump has also swept aside the freeze on LNG export permits and signed orders to promote oil and gas development in Alaska, though the industry is unlikely to expand there anytime soon.

These aggressive steps have raised concerns of higher US output in a market that is already widely expected to be oversupplied this year. As per the International Energy Agency’s recent market outlook, growth in the global demand for oil is expected to slow down in the coming years as energy transitions advance, putting downward pressure on prices. The US Energy Information Administration stated earlier this month that it expects Brent crude oil prices to fall 8% to average $74 a barrel in 2025, then fall further to $66 a barrel in 2026.

So it still remains to be seen whether the US oil majors will answer the President’s call and shell out the big bucks required to heavily boost their production. Instead, companies appear to have shifted their focus from aggressive growth to keeping their shareholders happy through fat dividends and generous share buybacks. Despite the falling oil prices, more and more fossil fuel companies are returning a bigger chunk of their profits to shareholders, signaling a clear priority shift away from reinvestment in oilfield development. Several oil bigwigs have even resorted to borrowing to make sure they leave their shareholders satisfied, as revealed by Bloomberg that four of the world’s five oil ‘supermajors’ saw fit to borrow $15 billion to fund share buybacks between July and September 2024.

Therefore, according to a recent survey by the Federal Reserve Bank of Dallas, only 14% of oil and gas executives plan to significantly increase capital spending this year, while more of them have plans to cut spending instead of ramping it up. But this doesn’t mean that America’s oil and gas sector doesn’t stand to win with Donald Trump in the Oval Office, especially since it poured more than $75 million in donations to his campaign. The American Petroleum Institute, the most powerful oil lobby in the United States, has outlined a wishlist of 70 policy actions it is seeking from Republicans, including issuing a new 5-year offshore leasing program and repealing environmental standards on vehicle emissions.

Methodology:

To collect data for this article, we used a stock screener to pick oil stocks that have gained over 20% in the last 12 months, as of the close of January 18, 2024. From this group, we picked the 12 companies with the highest number of hedge fund investors, according to Insider Monkey’s database of Q3 2024. The stocks are arranged in ascending order of the number of hedge funds invested in them. Following are the Hottest Oil Stocks to Buy According to Hedge Funds.

At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

Baker Hughes Company (NASDAQ:BKR)

Gain Over Past 12 Months: 51.15%

Number of Hedge Fund Holders: 45

Baker Hughes Company (NASDAQ:BKR) is a supplier of oilfield services, products, technology, and systems to the worldwide oil and natural gas industry. The company conducts business in 120 countries around the globe and while its vast geographical footprint allows it to capitalize on more opportunities, it also exposes the energy technology company to various geopolitical risks such as political instability, trade disputes, or unfavorable regulatory changes in key markets.

Baker Hughes Company (NASDAQ:BKR) boasts a 40-year track record in the LNG industry and is expected to benefit tremendously from the expanding LNG infrastructure in the US. Just recently, the company announced that it has received an order from Bechtel Energy to supply gas technology equipment for two liquefaction plants for the first phase of Woodside Energy Group Ltd’s Louisiana LNG development opportunity.

Baker Hughes Company (NASDAQ:BKR) had a strong Q3 2024 as it reported another record quarterly EBITDA of over $1.2 billion and the third consecutive quarter of at least 20% YoY EBITDA growth. Moreover, the company continued to improve its EBITDA margins at an accelerated pace, increasing to 17.5%, which marked the highest margin quarter since 2017. BKR’s total company orders also remained at solid levels during the quarter, including $2.9 billion for its IET segment.

Baker Hughes Company (NASDAQ:BKR) continues to make strides in the fast-growing new energy business and the company booked orders of $971 million during the first nine months of 2024, anticipating to exceed the $1 billion mark by the end of the year. This marked a significant improvement from the $750 million in new energy orders that Baker Hughes received in 2023.

Baker Hughes Company (NASDAQ:BKR) maintains a strong balance sheet and ended its Q3 2024 with $2.7 billion in cash and $5.7 billion in total liquidity. The company generated $754 million in free cash flow during the third quarter and returned $361 million to shareholders, including $209 million of dividends and $152 million of share repurchases.

Overall BKR ranks 4th on our list of the best hot oil stocks to buy according to hedge funds. While we acknowledge the potential for BKR as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than BKR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.