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 EOG Resources, Inc. (NYSE:EOG) 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).

EOG Resources, Inc. (NYSE:EOG)

Gain Over Past 12 Months: 21.3%

Number of Hedge Fund Holders: 46

EOG Resources, Inc. (NYSE:EOG) explores, develops, produces, and markets natural gas and crude oil. Founded in 1985, the company has operations in the US, Canada, the UK, Trinidad, China, and other international segments.

One of the most appealing aspects of EOG Resources, Inc. (NYSE:EOG) is its robust balance sheet. While the E&P sector is known for carrying high levels of debt, EOG is known to manage its debt levels very efficiently and return significant value to its shareholders. Over the last four years, the company has generated more than $22 billion in free cash flow and more than $25 billion in adjusted net income. The oil and gas producer also increased its regular dividend rate by 160% during the period and has paid or committed to pay more than $13 billion directly to shareholders through dividends and $3.2 billion indirectly through share repurchases, all while also reducing debt by 35%.

EOG Resources, Inc. (NYSE:EOG) has never reduced or suspended its regular dividends since it started paying them 27 years ago. The company has also recently announced plans to potentially return 100% or more of its free cash flow to shareholders in the near to medium term. EOG boosted its share buyback program by $5 billion at the end of Q3 2024 after beating profit estimates and stated that it would raise its debt balance to a range of $5 to $6 billion in the next 12 to 18 months, which would make additional cash available for investor payouts.

EOG Resources, Inc. (NYSE:EOG) is also well-positioned to take advantage of the growing gas demand in the US. The company’s Janus gas plant in the Delaware Basin is expected to be completed this year, while its Verde pipeline is already online, allowing EOG to access the Gulf Coast market.

Shares of EOG Resources, Inc. (NYSE:EOG) were held by 46 hedge funds in the IM database at the end of Q3 2024, with a total stake value of $836.45 million, up 45.2% from the previous quarter.

Overall EOG ranks 3rd on our list of the best hot oil stocks to buy according to hedge funds. While we acknowledge the potential for EOG 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 EOG 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.