- Devon Energy DVN: A leading energy company whose stock could benefit from Europe’s ban on Russian oil.
- Chevron CVX: One of Warren Buffett’s favorite energy stocks.
- Occidential Petroleum OXY: Shares of this energy giant have gained more than 100% so far this year, far outpacing the broader market.
Stocks of oil producers continue to outperform the broader market and have been one of the few bright spots in an otherwise dismal year. The S&P Global Oil Index is up nearly 20% this year, compared to a 14% decline in the benchmark S&P 500 index.
With war raging in Ukraine and countries around the world placing embargoes on Russian energy products, the price for crude oil has spiked around the world to its highest level since 2016.
While that has contributed to inflation hitting a 40-year high and added to financial pressures on consumers, it has proven to be a boon to oil producers who are reaping big profits from the oil they extract and sell after seeing demand for energy products collapse during the pandemic.
And the stocks of some oil producers are outpacing all others. Here are three energy stocks that every smart investor should own now.
Energy Stocks: Devon Energy (DVN)
Shares of Devon Energy (NYSE:DVN) have run very far, very fast. Year to date, DVN stock is up 52% at $69 a share. Over the last 12 months, the Oklahoma City-based stock has gained 173%, far outpacing the broader stock market.
But despite the big run, analysts forecast that Devon Energy shares could rise further in the coming months. Among 28 professional analysts who cover the company, the median price target on Devon Energy’s stock is currently $75, implying nearly 10% upside from current levels.
Like all oil producers, Devon Energy has benefitted from elevated prices for oil. Currently, West Texas Intermediate crude is priced at a multi-year high of $110 a barrel, while Brent crude, the international benchmark, is selling for nearly $113 per barrel.
And the price of oil is forecast to continue climbing throughout this year, especially as Europe moves to ban all oil imports from Russia. That ban, along with a protracted war in Ukraine, could see the price of oil shoot up further in coming months.
San Ramon, California-based Chevron (NYSE:CVX) got a huge vote of confidence and found itself in the spotlight recently when famed investor Warren Buffett revealed that he has dramatically boosted his stake in the oil company.
At the annual meeting of Buffett’s holding company, Berkshire Hathaway (NYSE:BRK.B), Buffett disclosed that he has increased his investment in Chevron to $25.9 billion in this year’s first quarter from $4.5 billion at the end of last year. Chevron is now the fourth biggest equity holding in Berkshire Hathaway’s portfolio.
Buffett’s position in Chevron helped to lift the stock that has already been on a tear this year. Since January, CVX stock has climbed 41% higher to now trade at $169 a share. Chevron’s stock is up 55% over the last year as oil demand has skyrocketed around the world.
Despite the gains, analysts also see more upside ahead for Chevron and its shareholders. The median price target on the stock among 26 analysts is $183.75, suggesting it can gain another 9% going forward.
Energy Stocks: Occidental Petroleum (OXY)
Among major oil producers, few if any have performed better than Occidental Petroleum (NYSE:OXY).
OXY stock is up 107% year to date. Investors who held Occidental Petroleum stock at the start of this year would have more than doubled their money by now. Compare that to the benchmark indexes that have fallen into bear market territory this year. In the past 12 months, Occidental Petroleum’s stock has gained 140% and now changes hands at $64.14 a share.
Yet despite the huge increase, there looks to potentially be more upside ahead for OXY stock. Analysts have a median price target on Occidental’s shares of $71, implying a further 11% gain might be ahead.
As with Chevron, Berkshire Hathaway has boosted its stake in Occidental Petroleum in recent months as the shares have run higher. In the first week of May, Berkshire bought 5.9 million shares of Occidental for $336 million. That boosted Berkshire’s stake in Occidental Petroleum to 15%, and is seen as a big vote of confidence in the future direction of the share price.
Disclosure: On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.