We recently published a list of the 10 Most Undervalued Energy Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where ConocoPhillips (NYSE:COP) stands against other undervalued energy stocks.
As of the close of May 2, 2025, the overall energy sector is undervalued by 13.1%, as compared to the general market’s undervaluation of 5.3%. The current downturn in the energy sector is primarily attributed to the current trade war sparked by President Trump’s tariffs and its resultant forecasted global economic slowdown. Moreover, global crude oil prices have plunged heavily since last month, with the West Texas Intermediate (WTI) crude price currently hovering around the $56 mark – a level it last hit during the Covid-19 pandemic in 2021.
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Crude oil took a fresh hit this weekend after OPEC+ stunned the market by announcing a larger-than-expected output increase for June. This follows a similar surge announced for May and signals a sharp reversal from the group’s efforts to defend crude prices. It seems like Saudi Arabia has adopted a low-price strategy, aiming to discipline overproducing members like Kazakhstan and Iraq. This could also be a part of Riyadh’s efforts to build good relations with Donald Trump, who has recently been calling on the Kingdom to increase production in order to bring prices down. Given the high volatility in the market, it comes as no surprise that short-sellers marginally increased their bets against oil and gas stocks in March, with short interest in the energy sector reaching 2.58% compared to 2.52% in February.
That said, while oil may be presenting a bleak outlook, there are other sectors within the energy business that look very promising right now. A significant growth driver for the global energy industry is the ongoing AI boom and its accompanying power-hungry data centers. According to the International Energy Agency, the global electricity demand from data centers is set to more than double by 2030 to around 945 terawatt-hours (TWh), slightly more than the entire electricity consumption of Japan today. The rise of AI is also reshaping US power markets, as according to BNEF, the country’s data center demand is projected to rise from 3.5% of total electricity demand today to 8.6% by 2035.
Big Tech seems to have jumped headfirst into the AI boom, with commitments to invest hundreds of billions of dollars to build data centers and ensure their energy supply. In fact, this strategic move has injected new life into sectors such as nuclear, which has regained the spotlight after several tech giants met on the sidelines of the CERAWeek conference in March and signed a pledge to support the goal of at least tripling the world’s nuclear energy capacity by 2050.
That said, there have been concerns lately that the power demand required by the ballooning data center industry may have been overestimated, which led to several energy stocks posting significant declines not so long ago. However, the recently reported better-than-expected results from the cloud and AI businesses of some American tech giants suggest that these fears may have been overblown. Commercial real estate executives have stated that while there has been a ‘pause’ in some data center capex, it is likely to be temporary, with hundreds of billions of dollars still to be spent.
An underground network of pipelines transporting oil through an expansive terrain.
Methodology:
To collect data for this article, we looked for companies operating in the energy sector with forward P/E ratios of below 15 as of the close of May 2, 2025. Then, we identified companies that have delivered substantial returns over the last five years, in order to steer clear of potential value traps. In the end, we selected companies with the highest number of hedge fund holders in the Insider Monkey database, as of Q4 2024. The following are the Most Undervalued Energy Stocks 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).
ConocoPhillips (NYSE:COP)
No. of Hedge Fund Holders: 86
Forward P/E Ratio as of May 2: 11.03
ConocoPhillips (NYSE:COP) is one of the world’s largest independent E&P companies based on oil and natural gas production and proved reserves.
ConocoPhillips (NYSE:COP) has recently transformed itself into a low-cost oil producer by selling its higher-cost oil assets and recycling that capital into acquiring lower-cost resources. The company significantly bolstered its position with the $22.5 billion acquisition of Marathon Oil last year, which added over 2 billion barrels of oil and gas resources with an average cost of supply below $30 to its portfolio. As a result, the company reported a strong performance in Q4 2024, posting an adjusted EPS of $1.98 against estimates of $1.83. COP’s production also rose 14.8% YoY to 2.183 million boe/d in Q4 2024.
ConocoPhillips (NYSE:COP) maintains a strong balance sheet, generating $20.3 billion in operational cash flow in FY2024. Renowned for its commitment to shareholders, the company returned $9.1 billion in the form of buybacks and dividends last year, representing 45% of CFO and well above its 30% commitment. COP boasts an impressive streak of 10 consecutive years of dividend growth and has plans to return $10 billion to its shareholders this year.
In a setback for ConocoPhillips (NYSE:COP), the stock was downgraded last week from ‘Buy’ to ‘Neutral’ by Bank of America’s Kalei Akamine, who lowered its price target from $138 to $107 per share. The new take was part of a broader update on oil and gas stocks.
Overall, COP ranks 2nd on our list of the most undervalued energy stocks to buy according to hedge funds. While we acknowledge the potential of COP as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than COP but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
