The Best Undervalued Energy Stocks: A Focus on Occidental Petroleum Corporation (NYSE: OXY)
In recent market analysis, we identified the 11 Best Undervalued Energy Stocks to Invest in Now. Among these, Occidental Petroleum Corporation (NYSE: OXY) has emerged as a notable contender worth examining closely in comparison to its peers in the undervalued energy sector.
Insights from Industry Experts
On March 18, Rob Thummel, a senior portfolio manager at Tortoise Capital, shared his insights on CNBC’s ‘Squawk on the Street’. He asserted that natural gas is set to be the leading growth driver in the energy market. The burgeoning demand for natural gas is largely fueled by the electricity sector and energy exports. Thummel pointed out a growing intersection between the energy and technology sectors, thanks in part to advancements such as artificial intelligence and the rise of data centers.
The Rise of US LNG Exports
Thummel highlighted the remarkable transition of the United States from an LNG importer to the largest exporter in just a few years. He foresees a doubling of US LNG export volumes, which will cater to global demands for affordable and eco-friendly energy solutions. Additionally, he indicated that nations in Europe and beyond will increasingly prioritize energy security and diversification, making them more dependent on US energy exports.
Investment Strategies Focused on Energy Infrastructure
Diving into specific investment strategies, Thummel emphasized the importance of energy infrastructure companies. These firms not only provide stable returns but also tend to offer high dividend yields, even in tumultuous market conditions. He posited that the reliability offered by infrastructure investments should not be overlooked, as these companies typically generate impressive annual cash flows while adhering to disciplined financial management.
Valuation Opportunities in the Energy Sector
Thummel noted that the energy sector is currently trading at a discount compared to historical valuations, which could present an exciting opportunity for investors seeking substantial returns. To identify potential stocks, we utilized the Finviz stock screener to compile a selection of top energy stocks with a forward P/E ratio below 15 as of April 10. This analysis led to the identification of 11 energy stocks favored by elite hedge funds and positively reviewed by analysts.
Why Hedge Fund Interest Matters
Hedge fund investment activity is a key metric for investors. Research has demonstrated that mirroring the stock picks of top-performing hedge funds can lead to superior market performance. Our quarterly newsletter, which identifies 14 small-cap and large-cap stocks, has enjoyed a remarkable return of 373.4% since May 2014, comfortably outpacing its benchmark by over 218 percentage points.
Spotlight on Occidental Petroleum Corporation
As of April 10, Occidental Petroleum Corporation (NYSE: OXY) boasts a forward P/E ratio of 12.58 and is held by 68 hedge funds. The company is engaged in acquiring, exploring, and developing oil and gas properties both domestically and internationally, with a primary focus on its operations in the Permian Basin. In 2024, Occidental reached record levels of quarterly US production, a feat attributed to its operational efficiency and enhanced well performance.
Future Growth Projections
Looking ahead to 2025, Occidental forecasts a production growth of over 15% from its Permian Basin operations, bolstered by contributions from CrownRock and legacy positions. The assets from CrownRock are estimated to generate over 170,000 barrels of oil equivalent (BOE) per day, indicating robust growth prospects. Approximately 75% of the company’s oil and gas investments are centered on its US onshore portfolio, primarily in the Permian region.
Conclusion: Is Occidental Petroleum the Best Energy Stock to Invest In?
In our assessment, Occidental Petroleum ranks 5th among the best undervalued energy stocks available now. While there is significant growth potential for OXY, we also recognize that other sectors, particularly artificial intelligence, present lucrative opportunities for high returns in a shorter timeframe. For those interested in investing in stocks, we recommend considering our report on a promising cheap AI stock trading at less than five times its earnings, as it may offer even greater potential than Occidental.