As weak demand among American consumers continues to be a concern in the recovery of oil prices amidst the Covid-19 pandemic, CNBC reported the commodity is on course for its biggest weekly decline since June.
Brent crude, which serves as the international benchmark, was up 0.6% at $44.35 on Friday, culminating in a 1.6% drop for the week. West Texas Intermediate rose 0.5% to $41.55, prepping for its first weekly drop in five weeks.
Based on these developments, investors may be looking for opportunities in the energy sector that gurus also see value in. As of Sept. 4, the GuruFocus Aggregated Portfolio, a Premium feature, found oil and gas drilling companies that were popular with gurus included Chevron Corp. (CVX, Financial), Schlumberger Ltd. (SLB, Financial), Exxon Mobil Corp. (XOM, Financial), ConocoPhillips (COP, Financial) and BP PLC (BP, Financial).
According to GuruFocus' industry overview, they are also some of the largest companies in the oil and gas sector.
Chevron
With a combined equity portfolio weight of 18.81%, 26 gurus are invested in Chevron.
The San Ramon, California-based oil and gas producer has a $155.02 billion market cap; its shares were trading around $83.54 on Friday with a price-book ratio of 1.16 and a price-sales ratio of 1.35.
The median price-sales chart shows the stock is trading near its historical value. The GuruFocus valuation rank of 3 out of 10, however, suggests the stock is overpriced.
GuruFocus rated Chevron's financial strength 5 out of 10 on the back of a low cash-debt ratio and an Altman Z-Score of 2.47 that indicates the company is under some pressure.
The company's profitability scored a 6 out of 10 rating. In addition to a declining gross margin, Chevron is being weighed down by negative returns that underperform a majority of competitors. It also has a low Piotroski F-Score of 3, which implies business conditions are in poor shape. Due to a five-year decline in revenue per share, the predictability rank of one out of five stars is on watch. According to GuruFocus, companies with this rank return, on average, 1.1% annually over a 10-year period.
Of the gurus invested in Chevron, Ken Fisher (Trades, Portfolio) has the largest stake with 0.28% of outstanding shares. Other top guru shareholders include Diamond Hill Capital (Trades, Portfolio), Barrow, Hanley, Mewhinney & Strauss, Pioneer Investments (Trades, Portfolio), David Carlson (Trades, Portfolio), the T Rowe Price Equity Income Fund (Trades, Portfolio) and Jim Simons (Trades, Portfolio)' Renaissance Technologies.
Schlumberger
Twenty-one gurus have positions in Schlumberger, representing a combined weight of 12.19%.
The oilfield services company, which is headquartered in Houston, has a market cap of $26.9 billion; its shares were trading around $19.53 on Friday with a price-book ratio of 2.23 and a price-sales ratio of 0.91.
According to the median price-sales chart, the stock is undervalued. The GuruFocus valuation rank of 9 out of 10 also supports this assessment.
Schlumberger's financial strength was rated 4 out of 10 by GuruFocus. In addition to poor interest coverage, the Altman Z-Score of -0.23 warns the company could be at risk of going bankrupt. The return on invested capital is also surpassed by the weighted average cost of capital, indicating the company is not turning a profit on its projects.
The company's profitability scored a 6 out of 10 rating. In addition to declining margins, Schlumberger is being weighed down by negative returns that underperform a majority of industry peers. It also has a low Piotroski F-Score of 3 and the two-star predictability rank is on watch as a result of declining revenue per share over the past several years. GuruFocus says companies with this rank typically return an average of 6% annually.
With a 6.42% stake, Dodge & Cox is the company's largest guru shareholder. First Eagle Investment (Trades, Portfolio), Fisher, Hotchkis & Wiley, Pioneer, Steven Cohen (Trades, Portfolio), Simons firm, David Carlson (Trades, Portfolio) and Bestinfond (Trades, Portfolio) also have large positions in the stock.
Exxon Mobil
Holding a combined portfolio weight of 11.97%, 20 gurus have positions in Exxon Mobil.
The Irving, Texas-based integrated oil and gas giant has a $166.63 billion market cap; its shares were trading around $39.58 on Friday with a price-earnings ratio of 23.46, a price-book ratio of 0.93 and a price-sales ratio of 0.79.
Based on the Peter Lynch chart, the stock appears to be overvalued. The GuruFocus valuation rank of 6 out of 10, however, leans more toward undervaluation.
Exxon Mobil's financial strength and profitability were both rated 6 out of 10 by GuruFocus. As a result of issuing approximately $26.5 billion in new long-term debt over the past three years, the company has poor interest coverage. The Altman Z-Score of 2.84 also indicates it is under some pressure. The WACC also surpasses the ROIC, suggesting returns on investments do not compensate for the capital employed into those projects.
The company is also supported by margins and returns that outperform at least half of its competitors and a moderate Piotroski F-Score of 5, which suggests operations are stable. Due to recording an operating income loss and declining revenue per share over the past several years, the one-star predictability rank is on watch.
First Eagle is the company's largest guru shareholder with a 0.65% stake. Fisher, Pioneer, T Rowe Price, Richard Pzena (Trades, Portfolio) and Yacktman Asset Management (Trades, Portfolio) also have large positions in the stock.
ConocoPhillips
A total of 16 gurus have a position in ConocoPhillips, carrying a combined portfolio weight of 8.83%.
The oil and gas producer, which is headquartered in Houston, has a market cap of $39.06 billion; its shares were trading around $36.64 on Friday with a price-earnings ratio of 17.94, a price-book ratio of 1.24 and a price-sales ratio of 1.64.
The Peter Lynch chart suggests the stock is overvalued; the GuruFocus valuation rank of 4 out of 10 aligns with this assessment.
GuruFocus rated ConocoPhillips' financial strength 5 out of 10. In addition to insufficient interest coverage, the Altman Z-Score of 2.3 indicates the company is under some pressure since the WACC is two times larger than the ROIC.
The company's profitability scored a 6 out of 10 rating, driven by margins and returns that outperform a majority of industry peers and a moderate Piotroski F-Score of 5. ConocoPhillips' one-star predictability rank is also on watch as a result of declining revenue per share over the past five years.
Of the gurus invested in ConocoPhillips, Fisher has the largest stake with 0.45% of outstanding shares. Pioneer, Tweedy Browne (Trades, Portfolio), the Yacktman Fund (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio) and several other gurus also own the stock.
BP
With a combined portfolio weight of 11.95%, 14 gurus are invested in BP.
The British oil giant has a $70.5 billion market cap; its shares were trading around $20.61 on Friday with a price-book ratio of 0.97 and a price-sales ratio of 0.3.
According to the median price-sales chart, the stock is undervalued. The GuruFocus valuation rank of 8 out of 10 also leans toward undervaluation.
BP's financial strength was rated 4 out of 10 by GuruFocus. As a result of issuing approximately $18.4 billion in new long-term debt over the past three years, the company has poor interest coverage and the Altman Z-Score of 0.88 warns it could be in danger of going bankrupt.
The company's profitability did not fare much better, scoring a 5 out of 10 rating on the back of negative margins and returns that underperform a majority of competitors. It also has a moderate Piotroski F-Score of 4. Due to recording an operating income loss and declines in revenue per share over the past several years, BP's one-star predictability rank is on watch.
With 0.30% of outstanding shares, Fisher is the company's largest guru shareholder. Other top guru investors of BP include Simons' firm, Barrow, Hanley, Mewhinney & Strauss, ValueAct Holdings LP (Trades, Portfolio), Kahn Brothers (Trades, Portfolio) and Charles Brandes (Trades, Portfolio).
Other oil and gas companies that are also popular among gurus include Marathon Petroleum Corp. (MPC, Financial), EOG Resources Inc. (EOG, Financial), Phillips 66 (PSX, Financial), Halliburton Co. (HAL, Financial) and Royal Dutch Shell PLC (RDS.A, Financial).
Disclosure: No positions.
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