Gurus Drilled Into These Energy Stocks in the 2nd Quarter

Investors loaded up on several oil and gas companies

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Aug 31, 2022
Summary
  • Oil prices were down on Wednesday.
  • Investors liked Chevron, Occidental Petroleum, Halliburton, Schlumberger and Kinder Morgan in the second quarter.
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Amid rising concerns about the state of the global economy, potential central bank interest rate hikes and increased Covid-19 restrictions in China, oil and natural gas prices continued to fall on Wednesday morning.

Having recorded significant spikes earlier in the year, West Texas Intermediate Crude prices declined 1.03% to around $90.70 per barrel, while prices for Brent crude were down 2.47% at $96.86. Natural gas prices fell 0.85%to $8.96.

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Additionally, the overall energy sector, which has outperformed the S&P 500 Index so far this year, was down 1.66% on Wednesday morning.

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Despite the trend in oil and gas prices, gurus are still finding plenty of value opportunities in the sector. According to GuruFocus’ Hot Picks, a Premium feature based on 13F filings, the energy companies most-bought by gurus during the second quarter were Chevron Corp. (

CVX, Financial), Occidental Petroleum Corp. (OXY, Financial), Halliburton Co. (HAL, Financial), Schlumberger Ltd. (SLB, Financial) and Kinder Morgan Inc. (KMI, Financial).

Investors should be aware that 13F filings do not give a complete picture of a firm’s holdings as the reports only include its positions in U.S. stocks and American depository receipts, but they can still provide valuable information. Further, the reports only reflect trades and holdings as of the most-recent portfolio filing date, which may or may not be held by the reporting firm today or even when this article was published.

Chevron

Held by 23 gurus with a combined equity portfolio weight of 27.54%, 11 buys and 11 sells were recorded for Chevron (

CVX, Financial) during the three months ended June 30.

The San Ramon, California-based oil and gas company has a $309.06 billion market cap; its shares were trading around $159.70 on Wednesday with a price-earnings ratio of 10.54, a price-book ratio of 2.02 and a price-sales ratio of 1.48.

The GF Value Line suggests the stock is modestly undervalued currently based on historical ratios, past financial performance and analysts’ future earnings projections.

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GuruFocus rated Chevron’s financial strength 8 out of 10, driven by adequate interest coverage and a high Altman Z-Score of 4.17 that indicates it is in good standing. The return on invested capital also slightly exceeds the weighted average cost of capital, indicating value is being created as the company grows.

The company’s profitability scored a 7 out of 10 rating on the back of margins and returns on equity, assets and capital that top over half of its competitors. Further, the Piotroski F-Score of 8 out of 9 indicates operations are healthy. Chevron also has a predictability rank of one out of five stars. According to GuruFocus research, companies with this rank return an average of 1.1% annually over a 10-year period.

Of the gurus invested in Chevron,

Warren Buffett (Trades, Portfolio) has the largest stake with 8.25% of its outstanding shares. Ken Fisher (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Stanley Druckenmiller (Trades, Portfolio), Ray Dalio (Trades, Portfolio), the Smead Value Fund (Trades, Portfolio) and several other gurus also own the stock.

Occidental Petroleum

Recording nine buys and 10 sells for the quarter, 17 gurus are invested in Occidental Petroleum (

OXY, Financial). The combined weight in their equity portfolios is 51.06%.

The oil and gas producer headquartered in Houston has a market cap of $66.41 billion; its shares were trading around $71.13 on Wednesday with a price-earnings ratio of 6.82, a price-book ratio of 3.67 and a price-sales ratio of 2.06.

According to the GF Value Line, the stock is significantly overvalued currently.

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Occidental’s financial strength was rated 5 out of 10 by GuruFocus. Despite having sufficient interest coverage, the Altman Z-Score of 2.11 suggests it is under some pressure since assets are building up at a faster rate than revenue is growing. However, value creation is occurring since the ROIC overshadows the WACC.

The company’s profitability fared better with a 7 out of 10 rating, driven by strong margins and returns that top a majority of industry peers. Occidental also has a high Piotroski F-Score of 7 and a one-star predictability rank.

With a 20.22% stake, Buffett is the company’s largest guru shareholder. Other top guru investors of Occidental include Dodge & Cox, the

Smead Value Fund (Trades, Portfolio), John Paulson (Trades, Portfolio), Prem Watsa (Trades, Portfolio), David Tepper (Trades, Portfolio) and Fisher.

Halliburton

Halliburton (

HAL, Financial), which recorded nine buys and five sells for the period, is held by 14 gurus with a combined equity portfolio weight of 10.41%.

The Houston-based oilfield services company has a $27.38 billion market cap; its shares were trading around $30.19 on Wednesday with a price-earnings ratio of 18.99, a price-book ratio of 3.84 and a price-sales ratio of 1.56.

Based on the GF Value Line, the stock appears to be significantly overvalued currently.

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GuruFocus rated Halliburton’s financial strength 5 out of 10 on the back of weak interest coverage. The Altman Z-Score of 3.01 suggests the company is under some pressure since revenue per share has declined over the past five years. The WACC also eclipses the ROIC, so the company is struggling to create value.

The company’s profitability fared better, scoring a 7 out of 10 rating on the back of an expanding operating margin and returns that are outperforming versus competitors. Halliburton also has a high Piotroski F-Score of 7 and a one-star predictability rank.

Richard Pzena (Trades, Portfolio) is Halliburton’s largest guru shareholder with a 1.84% stake. Hotchkis & Wiley, Barrow, Hanley, Mewhinney & Strauss, Fisher, Charles Brandes (Trades, Portfolio), Steven Cohen (Trades, Portfolio) and Mario Gabelli (Trades, Portfolio) also have significant positions in the stock.

Schlumberger

With a combined equity portfolio weight of 18.19%, 16 gurus own Schlumberger (

SLB, Financial) currently. Nine buys and 10 sells were recorded during the second quarter.

The oilfield services company, which is headquartered in Houston, has a market cap of $54.30 billion; its shares were trading around $38.39 on Wednesday with a price-earnings ratio of 20.86, a price-book ratio of 3.33 and a price-sales ratio of 2.22.

The GF Value Line suggests the stock is significantly overvalued currently.

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Schlumberger’s financial strength was rated 5 out of 10 by GuruFocus. Despite having adequate interest coverage, the Altman Z-Score of 2.53 indicates the company is under some pressure since revenue per share has declined in recent years. The WACC also surpasses the ROIC, suggesting it is struggling to create value.

The company scored a rating of 6 out of 10 for profitability, driven by operating margin expansion, strong returns that top a majority of industry peers and a high Piotroski F-Score of 7. Schlumberger also has a one-star predictability rank.

Of the gurus invested in Schlumberger, Dodge & Cox has the largest stake with 2.07% of its outstanding shares.

First Eagle Investment (Trades, Portfolio), Fisher, Spiros Segalas (Trades, Portfolio), Simons’ firm, Hotchkis & Wiley, Cohen and Dalio also have notable holdings.

Kinder Morgan

Having recorded eight buys and two sells during the quarter, Kinder Morgan (

KMI, Financial) is held by 11 gurus with a combined equity portfolio weight of 10.89%.

The Houston-based energy infrastructure company has a $41.37 billion market cap; its shares were trading around $18.27 on Wednesday with a price-earnings ratio of 17.09, a price-book ratio of 1.35 and a price-sales ratio of 2.33.

According to the GF Value Line, the stock is modestly undervalued currently.

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GuruFocus rated Kinder Morgan’s financial strength 4 out of 10. In addition to insufficient interest coverage, the low Altman Z-Score of 0.88 warns the company could be at risk of bankruptcy. The WACC also outshines the ROIC, meaning it is struggling to create value.

The company’s profitability fared better with a 6 out of 10 rating as a result of an expanding operating margin and returns that outperform over half of its competitors. Kinder Morgan also has a high Piotroski F-Score of 7 and a one-star predictability rank that is on watch.

David Abrams (Trades, Portfolio) has the largest stake in Kinder Morgan with 0.55% of its outstanding shares. Other top guru investors include First Pacific Advisors (Trades, Portfolio), Steven Romick (Trades, Portfolio), Simons’ firm and Jeremy Grantham (Trades, Portfolio).

Other popular picks

Additional energy companies that were bought by more than five gurus as of June 30 included Hess Corp. (

HES, Financial), TechnipFMC PLC (FTI, Financial), Phillips 66 (PSX, Financial), APA Corp (APA, Financial) and Consol Energy Inc. (CEIX, Financial).

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Disclosures

I/we have no positions in any stocks mentioned, and have no plans to buy any new positions in the stocks mentioned within the next 72 hours. Click for the complete disclosure
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