In this article we will take a look at the 10 best oil and energy stocks to buy now. You can skip our detailed analysis of the oil and energy industry’s outlook for 2021 and some of the major growth catalysts for these stocks and go directly to 5 Best Oil and Energy Stocks To Buy Now.
Oil price rallied sharply on March 24 after data from the U.S. signaled a strong economic recovery, watering down the market’s concerns regarding the recurrence of the coronavirus in Europe and various other parts of the world. Oil and energy stocks, which got clobbered in 2020, are beginning to show signs of a revival as the world begins a slow economic recovery. Oil and energy stocks have been under pressure as investors debate the future of the broader energy sector amid the rising green energy revolution, penetration of electric vehicles and the U.S.-led global discouragement of using fossils as a primary energy source. However, analysts believe that oil and energy stocks will continue to see a huge demand until at least several decades to come. Oil and gas companies are also swiftly changing their business models and scrambling to diversify their product mix to cut their reliance on fossils. According to a report by Norway-based DNV, despite all the challenges, oil and gas will account for 44% of the world’s primary energy supply in 2050, down from 53% the current levels.
Earlier this month, ratings agency Fitch upped its 2021 and 2022 oil price assumptions for Brent and West Texas Intermediate (WTI) benchmarks, citing stronger-than-expected demand and OPEC policies. The firm is also bullish on the industry pricing amid harsh winters in the northern hemisphere and an economic rebound in Asia.
Our Criteria for Choosing the Best Oil and Energy Stocks To Buy Now
Despite the difficult conditions of the market, the companies in our list of 10 best oil and energy stocks to buy now managed to see revenue growth in the most recent quarter. These stocks also have a PE (TTM) ratio of less than 20, which means their valuations fall in an acceptable category. You will also notice that several of the oil and energy companies mentioned in our article are related to gas, the future of the energy markets. The DNV report said that gas “is set to become the primary energy source towards 2050.”
The volatility is not just hammering the energy market. The hedge fund industry that once used to post sterling gains is also feeling the reverberations of the changing financial landscape. The hedge fund industry’s reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox. Let’s start our list of 10 best oil and energy stocks to buy now.
10. MV Oil Trust (NYSE: MVO)
Number of Hedge Fund Holders: 1
MV Oil Trust ranks 10th on the list of 10 best oil and energy stocks to buy now. The company owns assets and natural gas properties of MV Partners, LLC, including 900 producing oil and gas wells located in the Mid-Continent region in the states of Kansas and Colorado. In January 2021, the company declared a quarterly dividend of $0.11 per share, which shows a 15.8% increase from prior dividend of $0.095. The stock has a dividend yield of over 9%.
There was 1 hedge fund that holds a position in MVO in the fourth quarter. The only hedge fund stakeholder of the company is Arrowstreet Capital, with 29,500 shares, worth $92,000.
9. United States Oil Fund, LP (NYSE: USO)
Number of Hedge Fund Holders: 2
The United States Oil Fund is one of the best oil and gas ETFs to buy in 2021. The ETF tracks West Texas Intermediate Light Sweet Crude Oil. Year to date, the ETF is up about 20%. Some of its top holdings include Future Contract On Wti Crude Future, FidelityÂ® Inv MM Fds Government Instl, Goldman Sachs, FS Government Instl, Morgan Stanley Instl, Lqudty Govt Instl, and United States Treasury Bills.
With a $7.97 million stake in USO, Ken Griffin’s Citadel Investment Group owns 241,369 shares of the ETF as of the end of the fourth quarter of 2020. Our database shows that 2 hedge funds held stakes in USO as of the end of the fourth quarter, versus 1 fund in the third quarter.
8. Sunoco LP (NYSE: SUN)
Number of Hedge Fund Holders: 3
Sunoco ranks 8th on the list of 10 best oil and energy stocks to buy now. The company operates over 7,000 gas stations. The stock has gained a spectacular 122% over the last 12 months. With a 10% dividend yield, Sunoco is a strong option to consider for income investors. The company funded its huge dividend payments even in the midst of a difficult market environment, thanks to its strong cash flows.
As of the end of the fourth quarter, there were 3 hedge funds in Insider Monkey’s database that held stakes in Sunoco LP, compared to 6 funds in the third quarter. Arrowstreet Capital, with 105,879 shares of SUN, is the biggest stakeholder in the company.
7. Phillips 66 Partners LP (NYSE: PSXP)
Number of Hedge Fund Holders: 4
Phillips 66 is one of the best oil and energy stocks to buy now. The company acquires and operates fee-based crude oil, refined petroleum product and natural gas liquids (NGL) pipelines, terminals and other transportation and midstream assets. Even though the stock is trading in the red, it is a strong investment option to consider because of its decent dividend yield. Reports also suggest that the company is considering selling itself. For 2021, the company’s capital budget is $1.7 billion, about 43% lower than the previous year, as the company is cutting costs to increase profitability.
A total of 4 hedge funds tracked by Insider Monkey were bullish PSXP at the end of the fourth quarter. Zimmer Partners is the biggest stakeholder of the company with 718,069 shares.
6. Shell Midstream Partners, L.P. (NYSE: SHLX)
Number of Hedge Fund Holders: 7
Owned by oil giant Shell, Shell Midstream operates pipelines and other midstream and logistics assets. The company stands out with a double-digit distribution yield of 16%. The company’s operating cash flow in the fourth quarter and full-year 2020 remained strong despite market headwinds. The stock is up 34% over the last 12 months.
As of the end of the fourth quarter, 7 hedge funds in Insider Monkey’s database of 887 funds held stakes in SHLX, compared to 6 funds in the third quarter. Arrowstreet Capital is the biggest stakeholder in the company, with 1.3 million shares, worth $13.3 million.
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Disclosure: None. 10 Best Oil and Energy Stocks To Buy Now is originally published on Insider Monkey.