As 2022 comes to a close in a few weeks’ time, investors are starting to search for value opportunities to take advantage of in the new year.
Having seen a slump in oil prices over the past several years, 2022 has been a banner year for the energy sector on the back of the Russia-Ukraine conflict, high inflation, rising interest rates and anxiety about the strength of the global economy. The sector has posted a return of 38.45% so far this year, outperforming the rest of the market by a wide margin.
International benchmark Brent crude futures were up 1.20% at $76.39 on Wednesday morning, while West Texas Intermediate crude futures gained 1.34% to trade at $76.38.
While there are some concerns for oil production heading into 2023, investors may still find value prospects among energy companies that outperformed the Standard & Poor’s 500 Index by at least 70% over the past 12 months.
As of Dec. 14, the GuruFocus All-in-One Screener, a Premium feature, found several stocks that had a higher return relative to the index for the period. It also looked for companies with a business predictability rank of at least one out of five stars. These companies are members of the benchmark index, which has posted a return of roughly -16% year to date.
Stocks within the S&P 500 that met these criteria included Occidental Petroleum Corp. (OXY, Financial), Marathon Oil Corp. (MRO, Financial), APA Corp. (APA, Financial), Valero Energy Corp. (VLO, Financial) and Marathon Petroleum Corp. (MPC, Financial).
Occidental Petroleum
Outperforming the index by approximately 135.97% over the past 12 months, Occidental Petroleum (OXY, Financial) has a $57.23 billion market cap; its shares were trading around $63.63 on Wednesdaywith a price-earnings ratio of 5.11, a price-book ratio of 3.02 and a price-sales ratio of 1.70.
The Houston-based oil and gas producer has operations in the U.S. as well as the Middle East. It also has petrochemical manufacturing facilities in the U.S., Canada and Chile.
The GF Value Line suggests the stock is modestly overvalued currently based on historical ratios, past performance and analysts’ future earnings projections.
Further, the GF Score of 70 out of 100 indicates the company is likely to have poor performance going forward. While Occidental received a high rating for profitability, its growth and financial strength ranks were moderate and its marks for GF Value and momentum were low.
Of the gurus invested in Occidental Petroleum, Warren Buffett (Trades, Portfolio) has the largest stake with 21.38% of its outstanding shares. Dodge & Cox, the Smead Value Fund (Trades, Portfolio) and Steven Cohen (Trades, Portfolio) also have notable positions in the stock.
Marathon Oil
Beating the benchmark by around 96.90% over the past year, Marathon Oil (MRO, Financial) has a market cap of $17.48 billion; its shares were trading around $27.65 on Wednesday with a price-earnings ratio of 5.28, a price-book ratio of 1.58 and a price-sales ratio of 2.58.
The oil and gas producer, which is headquartered in Houston, has begun to focus on unconventional resources in the U.S.
According to the GF Value Line, the stock is fairly valued currently.
The GF Score of 81 suggests the company has good outperformance potential, driven by a high rating for profitability and middling marks for the other four criteria.
With a 2.28% stake, Hotchkis & Wiley is the company’s largest guru shareholder. Other guru investors include Ken Fisher (Trades, Portfolio), Cohen, Ray Dalio (Trades, Portfolio)’s Bridgewater Associates, Joel Greenblatt (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Jeremy Grantham (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio) and Lee Ainslie (Trades, Portfolio).
APA
Eclipsing the benchmark index by around 95.89% over the past year, APA (APA, Financial) has a $14.54 billion market cap; its shares were trading around $45.73 on Wednesday with a price-earnings ratio of 4.32, a price-book ratio of 24.44 and a price-sales ratio of 1.42.
The Houston-based oil and gas producer is the holding company of Apache Corp.
Based on the GF Value Line, the stock appears to be fairly valued currently.
The GF Score of 70 implies the company is likely to have poor future performance on the back of middling marks for four of the criteria and a low growth rank.
Hotchkis & Wiley has the largest stake in APA with 3.66% of its outstanding shares. Bill Nygren (Trades, Portfolio), Cohen, John Paulson (Trades, Portfolio) and Simons’ firm also have significant holdings.
Valero Energy
Topping the S&P 500 by 93.49% in 2022, Valero Energy (VLO, Financial) has a market cap of $46.45 billion; its shares were trading around $120.24 on Wednesday with a price-earnings ratio of 5.14, a price-book ratio of 2.12 and a price-sales ratio of 0.29.
Headquartered in San Antonio, Texas, the midstream oil and gas company operates refineries in the U.S., Canada and the U.K. It also owns ethanol plants.
The GF Value Line suggests the stock is modestly undervalued currently.
Further, the GF Score of 83 means the company has good outperformance potential. It raked in high ratings for profitability, financial strength and GF Value and middling marks for growth and momentum.
Of the gurus invested in Valero, Barrow, Hanley, Mewhinney & Strauss has the largest stake with 0.33% of its outstanding shares. Simons’ firm, PRIMECAP Management (Trades, Portfolio), Dalio’s firm, Jones, Jeff Auxier (Trades, Portfolio) and Greenblatt, among several other gurus, also own the stock.
Marathon Petroleum
Surpassing the benchmark index by about 93.48% for the year, Marathon Petroleum (MPC, Financial) has a $52.01 billion market cap; its shares were trading around $110.97 on Wednesday with a price-earnings ratio of 4.87, a price-book ratio of 1.98 and a price-sales ratio of 0.35.
The Findlay, Ohio-based midstream company refines, markets and transports petroleum products in the U.S.
According to the GF Value Line, the stock is modestly undervalued currently.
The GF Score of 72 means the company is likely to have average performance in the future. While Marathon got high ratings for profitability and GF Value, its financial strength rank was more moderate. Momentum and growth were both low.
With a 0.35% stake, Simons’ firm is the company’s largest guru shareholder. Dalio’s Bridgewater, Bernard Horn (Trades, Portfolio), Greenblatt, Grantham, Murray Stahl (Trades, Portfolio) and Fisher also have positions in Marathon Petroleum.
Additional outperformers
Other energy stocks that also beat the S&P 500 this year included Exxon Mobil Corp. (XOM, Financial), EQT Corp. (EQT, Financial), Devon Energy Corp. (DVN, Financial) and ConocoPhillips (COP, Financial).
