As we move into 2024, the energy sector remains a critical focus for investors. Given the ever-increasing global demand for energy and the transition toward sustainable sources, identifying the best energy stocks to invest in can be a daunting task. This article will delve into the top five energy stocks to consider in 2024: Exxon Mobil Corp. (XOM), Chevron (CVX), Valero Energy Corporation (VLO), Devon Energy Corp. (DVN), and ONEOK Inc. (OKE).
Key Takeaways:
- Exxon Mobil Corp. (XOM): A major player in the oil and gas industry with a robust dividend yield.
- Chevron (CVX): Known for its strong balance sheet and extensive global operations.
- Valero Energy Corporation (VLO): A leading refinery with a focus on renewable energy.
- Devon Energy Corp. (DVN): A dynamic oil and gas producer with a focus on shale plays.
- ONEOK Inc. (OKE): A midstream company specializing in natural gas and NGLs.
Why Invest in Energy Stocks?
Investing in energy stocks provides exposure to an essential sector that powers the global economy. The energy market encompasses various segments, including upstream (exploration and production), midstream (transportation and storage), and downstream (refining and marketing). Each segment offers unique opportunities and risks, making diversification within the sector crucial.
Energy Market Growth:
- The global renewable energy market, valued at $970 billion in 2022, is set to expand rapidly. Projections indicate it will surpass $2.18 trillion by 2032, growing at 8.5% annually. precedenceresearch
- Global renewable energy market, valued at $856.08 billion in 2021, is set to reach $2.03 trillion by 2030. It’s projected to grow 9.6% annually this decade. nextmsc
Performance Comparison of Top Energy Stocks
| Company | 1-Year Return | Key Energy Stocks Applications |
|---|---|---|
| Exxon Mobil Corp. (XOM) | -6.3% | Oil and gas exploration, production, refining |
| Chevron (CVX) | -13.6% | Oil and gas exploration, production, refining |
| Valero Energy Corporation (VLO) | +5.9% | Refining, renewable energy |
| Devon Energy Corp. (DVN) | -21.8% | Oil and gas exploration, production, shale plays |
| ONEOK Inc. (OKE) | +13.2% | Natural gas and NGL transportation, storage |
Top 5 Energy Stocks to Watch in 2024
The companies we have listed are based on hedge fund interest, using data from Insider Monkey’s Q1 2024 report.
1. Exxon Mobil Corp. (XOM)
Number of Hedge Fund Holders (Q1 2024): 82
ExxonMobil, a global energy and petrochemical giant founded in 1882, operates through three main segments: Upstream, Downstream, and Chemical. With a workforce of 62,000 and 2023 earnings of $36 billion, the company has a significant global footprint, including operations in Guyana, Indonesia, Papua New Guinea, and Qatar. ExxonMobil’s recent initiatives focus on sustainability, aiming for net-zero emissions by 2050 and fostering partnerships to support energy transition.
The corporation is renowned for its innovative products and technologies, such as Exxsol™ Hexane for oil seed extraction and metal solvent extraction processes. These developments showcase ExxonMobil’s commitment to advancing chemical manufacturing capabilities. The company’s recent collaboration with SK On to supply lithium for electric vehicle batteries further demonstrates its adaptation to evolving energy landscapes and its dedication to strengthening domestic supply chains in the United States.
According to insidermonkey, Pzena Investment Management, led by Richard S. Pzena, holds a significant stake in Exxon Mobil Corp. (XOM). Their investment amounts to 594,716 shares, valued at approximately $68.5 million.
ExxonMobil’s second-quarter 2024 results reveal year-to-date earnings of $17.5 billion, down from $19.3 billion in the first half of 2023. Despite lower refining margins and natural gas prices, strong volume growth from Guyana, Pioneer, and Permian assets partially offset losses. The company achieved $10.7 billion in cumulative structural cost savings versus 2019 and is on track for $5 billion more by 2027.
Strong cash flow generation continued, with $25.2 billion from operations and $15.0 billion in free cash flow for the first half of 2024. Shareholder distributions totaled $16.3 billion, including $8.1 billion in dividends and $8.3 billion in share repurchases. The company plans to repurchase over $19 billion of shares in 2024 and declared a third-quarter dividend of $0.95 per share.
ExxonMobil is advancing several future-focused projects, including a virtually carbon-free hydrogen facility in Baytown, Texas, capable of producing 1 billion cubic feet of hydrogen daily. The company also signed an MOU with SK On for up to 100,000 metric tons of MobilTM Lithium and expanded its carbon capture and storage agreements, now totaling 5.5 million metric tons of CO2 per year from industrial customers.
According to Wall Street Analyst on XOM stock. Of the 29 analysts following the stock, 11 give it a Buy and 13 has it at Hold.
Why We Picked Exxon Mobil Corp.:
ExxonMobil represents an attractive investment opportunity due to its strong financial performance, global market presence, and strategic positioning in the energy transition. The company’s diversified operations across upstream, downstream, and chemical segments provide stability and multiple revenue streams. ExxonMobil’s commitment to sustainability and investment in future energy technologies, coupled with its consistent dividend history, make it an appealing choice for investors seeking a balance of current returns and long-term growth potential in the evolving energy sector.
2. Chevron (CVX)
Number of Hedge Fund Holders (Q1 2024): 64
Chevron Corporation, a leading multinational energy company founded in 1879, operates globally in upstream, downstream, and chemical sectors. With headquarters in California and a market cap of $294.08 billion, Chevron employs around 48,600 people worldwide. The company’s stock (CVX) boasts a P/E ratio of 14.69, EPS of $10.87, and an annual dividend yield of 4.06%.
Chevron’s international presence spans key regions like Australia, Angola, and Kazakhstan, where it engages in oil and gas exploration, production, and LNG projects. Recent initiatives include sustainability efforts to reduce carbon emissions and investments in renewable energy. The company’s acquisition of Noble Energy has bolstered its natural gas portfolio, demonstrating Chevron’s commitment to growth and innovation in the evolving energy landscape.
According to insidermonkey, Diamond Hill Capital, under Ric Dillon’s leadership, maintains a substantial position in Chevron (CVX). Their investment comprises 2,248,594 shares, with a total value of about $351.7 million.
Chevron’s second quarter 2024 results show mixed performance. Earnings decreased compared to last year, but worldwide production increased by 11%, driven by acquisitions and strong performance in key U.S. basins. The company maintained its commitment to shareholder returns, distributing $6 billion in dividends and share repurchases.
Capital expenditure rose due to increased upstream investments, particularly in legacy PDC assets. Cash flow from operations remained stable, with lower earnings offset by higher dividends from equity affiliates and reduced working capital. The Board declared a quarterly dividend of $1.63 per share.
Chevron expanded its global exploration portfolio, securing new acreage in Namibia, Angola, Equatorial Guinea, and Brazil. The company also made progress on key projects, including advancements at Tengizchevroil and testing innovative leak detection methods in California.
According to Wall Street Analyst on CVX stock. Of the 26 analysts following the stock, 14 give it a Buy and 9 has it at Hold.
Why We Picked Chevron:
Chevron’s strong financial performance, global diversification, and commitment to sustainability make it an attractive investment option. The company’s consistent dividend growth, coupled with its strategic positioning in both traditional and renewable energy sectors, offers potential for long-term value. Additionally, Chevron’s focus on operational efficiency and its adaptability to market changes provide resilience in the face of energy sector volatility.
3. Valero Energy Corporation (VLO)
Number of Hedge Fund Holders (Q1 2024): 44
Valero Energy Corporation, founded in 1980 and headquartered in San Antonio, Texas, is a prominent player in the energy sector. With approximately 12,000 employees, Valero operates primarily in refining and ethanol production. The company boasts a market capitalization of $49.029 billion, a P/E ratio of 7.31, and an EPS of $20.37. Valero offers a dividend of $4.28 per share, yielding 2.88%, with an ex-dividend date of August 1, 2024.
Valero’s global footprint includes 15 petroleum refineries across the United States, Canada, and the United Kingdom, with a combined throughput capacity of about 3.2 million barrels per day. The company is actively investing in sustainability initiatives, focusing on renewable fuels such as renewable diesel and sustainable aviation fuel. In 2021, Valero expanded its renewable energy portfolio by acquiring a 50% interest in the Diamond Green Diesel joint venture, demonstrating its commitment to adapting to the evolving energy landscape.
According to insidermonkey, Bailard Inc, led by Thomas Bailard, holds a position in Valero Energy Corporation (VLO). Their investment consists of 54,789 shares, valued at approximately $8.6 million.
Valero Energy’s Q2 2024 results show a net income of $880 million, or $2.71 per share. The company returned $1.4 billion to stockholders through dividends and buybacks. Refining segment income decreased, while renewable diesel and ethanol segments also saw lower earnings compared to Q2 2023.
The company maintained strong liquidity with $5.2 billion in cash and equivalents. Capital investments totaled $420 million, primarily for business sustainment. Valero remains committed to a minimum annual payout ratio of 40-50% through market cycles.
Valero’s strategic focus includes the upcoming Sustainable Aviation Fuel project at the Diamond Green Diesel Port Arthur plant. Expected to be operational in Q4 2024, this $315 million project aims to make DGD a leading global SAF manufacturer.
According to Wall Street Analyst on VLO stock. Of the 20 analysts following the stock, 12 give it a Buy, 5 has it at Hold and 1 calls it a Sell.
Why We Picked Valero Energy Corporation:
Valero’s attractive valuation, evidenced by its low P/E ratio, coupled with its strong earnings per share, makes it an appealing investment option. The company’s consistent dividend payments and its strategic positioning in both traditional refining and renewable energy sectors offer potential for both income and growth. Additionally, Valero’s proactive approach to sustainability and its diversified operations provide resilience in the face of energy market fluctuations, making it a compelling choice for investors seeking exposure to the energy sector.
4. Devon Energy Corp. (DVN)
Number of Hedge Fund Holders (Q1 2024): 44
Devon Energy Corp. (DVN) is a prominent independent energy company based in Oklahoma City, focusing on oil, natural gas, and natural gas liquids exploration and production in the United States. With operations spanning key regions like the Delaware Basin and Eagle Ford, Devon has demonstrated strong financial performance, boasting a market capitalization of $29.08 billion and an attractive dividend yield of 5.98%.
Under the leadership of CEO Rick Muncrief, Devon Energy has achieved record oil production while prioritizing sustainability. The company integrates ESG principles into its strategy, striving to reduce carbon intensity and invest in community initiatives. With approximately 1,900 employees, Devon continues to balance operational excellence with environmental stewardship, positioning itself as a leader in the evolving energy landscape.
According to insidermonkey, Yacktman Asset Management, under Donald Yacktman’s guidance, holds a significant stake in Devon Energy Corp. (DVN). Their investment includes 3,317,879 shares, with a total value of about $157.3 million.
Devon Energy reported strong second-quarter 2024 results, with net earnings of $844 million and core earnings of $885 million. The company’s operating cash flow increased by 9% year-over-year, reaching $1.5 billion. Devon’s financial position strengthened, with cash balances of $1.2 billion and a net debt-to-EBITDAX ratio of 0.6 times.
The company declared a fixed-plus-variable dividend of $0.44 per share and continued its share repurchase program. Devon’s capital activity resulted in 114 gross operated wells being placed online, with upstream capital spending decreasing by 14% compared to the previous year.
Devon’s oil production reached a record high of 335,000 barrels per day, exceeding guidance by 3%. The company also announced the acquisition of Grayson Mill Energy’s Williston Basin business for $5 billion, which is expected to close by the end of the third quarter of 2024.
According to Wall Street Analyst on DVN stock. Of the 33 analysts following the stock, 18 give it a Buy and 12 has it at Hold.
Why We Picked Devon Energy Corp.:
Devon Energy stands out as an attractive investment option due to its robust operational performance, strong financial metrics, and commitment to sustainability. The company’s focus on high-quality assets in key U.S. basins, coupled with its efficient cost management, positions it well to capitalize on energy market dynamics. Devon’s attractive dividend yield and emphasis on shareholder returns, combined with its efforts to reduce environmental impact, make it a compelling choice for investors seeking exposure to the energy sector with a balance of growth potential and responsible practices.
5. ONEOK Inc. (OKE)
Number of Hedge Fund Holders (Q1 2024): 32
ONEOK Inc. (NYSE: OKE), headquartered in Tulsa, Oklahoma, is a leading midstream service provider in the energy sector. The company specializes in natural gas and natural gas liquids (NGL), operating one of the largest NGL systems in the United States. ONEOK’s operations span gathering, processing, fractionating, transporting, and storing natural gas and NGLs, connecting major supply regions with key market centers.
As a FORTUNE 500 company listed on the S&P 500 index, ONEOK is known for its robust financial performance and diverse cash flow generation. The company’s corporate structure includes various subsidiaries, such as ONEOK Partners, L.P. In May 2023, ONEOK announced the acquisition of Magellan Midstream Partners, a strategic move aimed at enhancing operational efficiencies and financial synergies.
According to insidermonkey, SIR Capital Management, led by Vince Maddi and Shawn Brennan, maintains a position in ONEOK Inc. (OKE). Their investment consists of 166,718 shares, valued at approximately $13.6 million.
ONEOK’s second quarter 2024 performance showcased robust financial and operational growth. The company reported net income of $780 million, or $1.33 per diluted share, with adjusted EBITDA reaching $1.6 billion. Significant volume increases in the Rocky Mountain region and acquisition-related synergies contributed to these strong results.
The Natural Gas Liquids and Natural Gas Pipelines segments saw notable adjusted EBITDA increases of 19% and 14%, respectively. ONEOK’s strategic expansion continued with the acquisition of NGL pipelines in the Gulf Coast region and plans for a refined products pipeline expansion to the Denver area.
ONEOK’s commitment to sustainability was recognized with an MSCI ESG Rating of AAA in June 2024. The company maintained a healthy financial position, with a 3.36 times net debt-to-EBITDA ratio and no borrowings outstanding under its $2.5 billion credit agreement as of June 30, 2024.
According to Wall Street Analyst on OKE stock. Of the 22 analysts following the stock, 8 give it a Buy and 11 has it at Hold.
Why We Picked ONEOK Inc.:
ONEOK presents an attractive investment opportunity due to its strong market position in the midstream energy sector. The company’s extensive infrastructure network provides a competitive advantage, while its focus on natural gas and NGLs aligns with the ongoing energy transition. ONEOK’s recent strategic acquisitions and consistent financial performance suggest potential for growth and value creation. Additionally, the company’s inclusion in the S&P 500 index offers stability and liquidity for investors.
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Conclusion
Investing in the energy sector in 2024 presents a unique opportunity to capitalize on the industry’s growth and transition to sustainable energy sources. The top five energy stocks to consider are Exxon Mobil Corp. (XOM), Chevron (CVX), Valero Energy Corporation (VLO), Devon Energy Corp. (DVN), and ONEOK Inc. (OKE). Each of these companies offers a unique value proposition, strong financials, and strategic initiatives that position them well for future success.
FAQs
1. What are the best energy stocks to buy in 2024?
The best energy stocks to buy in 2024 include Exxon Mobil Corp. (XOM), Chevron (CVX), Valero Energy Corporation (VLO), Devon Energy Corp. (DVN), and ONEOK Inc. (OKE). These companies have strong financials, strategic assets, and are well-positioned to capitalize on industry trends.
2. Why should I invest in energy stocks?
Investing in energy stocks provides exposure to a critical sector that powers the global economy. The energy sector offers opportunities for growth and income, with companies involved in various segments, including exploration, production, refining, and transportation.
3. What factors should I consider when investing in energy stocks?
When investing in energy stocks, consider factors such as the company’s financial health, asset base, operational efficiency, and commitment to sustainability. Diversification within the sector is also crucial to mitigate risks.
4. How does the transition to renewable energy impact traditional energy stocks?
The transition to renewable energy presents both challenges and opportunities for traditional energy stocks. Companies that invest in renewable energy projects and emission reduction technologies are better positioned to adapt to changing industry dynamics and capitalize on growth opportunities.
5. What are the risks associated with investing in energy stocks?
Investing in energy stocks carries risks, including commodity price volatility, regulatory changes, and geopolitical factors. It’s essential to conduct thorough research and consider diversification to mitigate these risks.
