If any investor has stood the test of time, it is Warren Buffett. For years, the “Oracle of Omaha” has had a rock-star-like presence in the investing world. His annual Berkshire Hathaway shareholders meeting draws literally thousands of loyal fans who are investors. Known for his long buy-and-hold strategies and his massive portfolio of public and private holdings, he remains one of the preeminent investors in the world.
One reason for Berkshire Hathaway’s stunning success over the years is that Buffett and his right-hand man, Charlie Munger, have always tried to stay with stock ideas they understand. That has proven to be a winning hand. In addition, many of the companies in their portfolio pay solid and reliable dividends.
Top Wall Street pundits have been amazed at the second-quarter additions Buffett has made to the Berkshire Hathaway portfolio in the energy sector, as he continues to build a gigantic stake in one company and, according to the most recent 13-F filings, added shares of another integrated energy giant during the quarter. Of the approximately $3.8 billion he invested during the second quarter, a large portion was directed to these two stocks.
Both of the stocks Buffett owns are Buy rated on Wall Street, as are five additional ideas investors should consider now. Oil prices tumbled during the summer and could be poised for a major move higher, as OPEC is considering production cuts after the flood of Russian oil hit the market.
It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Berkshire Hathaway Energy Stocks
Chevron
This integrated giant posted huge second-quarter results and remains a safer way for investors looking to get positioned in the energy sector. Chevron Corp. (NYSE: CVX) engages in integrated energy and chemicals operations worldwide.
The Upstream segment is involved in the exploration, development, production and transportation of crude oil and natural gas; processing, liquefaction, transportation and regasification associated with liquefied natural gas (LNG); transportation of crude oil through pipelines; and transportation, storage and marketing of natural gas, as well as operating a gas-to-liquids plant.
The Downstream segment engages in refining crude oil into petroleum products; marketing crude oil, refined products and lubricants; manufacturing and marketing of renewable fuels; transporting crude oil and refined products by pipeline, marine vessel, motor equipment and rail car; and manufacturing and marketing of commodity petrochemicals, plastics for industrial uses, and fuel and lubricant additives. It is also involved in cash management and debt financing activities, insurance operations, real estate activities and technology businesses.
Chevron stock comes with a 3.62% dividend. Credit Suisse’s $202 target price is well above the $175.70 consensus target. The shares closed more than 3% higher on Tuesday at $161.94.
Occidental Petroleum
Over the past year, Berkshire Hathaway has been buying the shares of Occidental Petroleum Corp. (NYSE: OXY), which engages in the acquisition, exploration and development of oil and gas properties in the United States, the Middle East, Africa and Latin America.
The company’s Oil and Gas segment explores for, develops and produces oil and condensate, natural gas liquids (NGLs) and natural gas. Its Midstream and Marketing segment gathers, processes, transports, stores, purchases and markets oil, condensate, NGLs, natural gas, carbon dioxide and power. This segment also trades around its assets, consisting of transportation and storage capacity, and it invests in entities.
The Chemical segment manufactures and markets basic chemicals, including chlorine, caustic soda, chlorinated organics, potassium chemicals, ethylene dichloride, chlorinated isocyanurates, sodium silicates and calcium chloride.
Last Friday, Berkshire Hathaway received regulatory approval to buy up to 50% of the stock. On last look the investment giant owns 188.5 million shares of Occidental, which is equal to a 20.2% position. Some reports have indicated Buffett will not acquire a controlling stake.
Investors receive a 0.75% dividend. Truist Financial has a $105 price target on Occidental Petroleum stock. The $75.63 consensus is closer to Tuesday’s closing print of $73.78, which was up almost 7% on the day.
24/7 Wall St.‘Strong Buy’ Dividend Energy Stocks
Devon Energy
This may be one of the best value propositions in the sector, as it uses a variable dividend strategy. Devon Energy Corp. (NYSE: DVN) is an independent energy company that primarily engages in the exploration, development and production of oil, natural gas and NGLs in the United States and Canada. It operates approximately 19,000 wells.
The company also offers midstream energy services, including gathering, transmission, processing, fractionation and marketing to producers of natural gas, NGLs, crude oil and condensate through its natural gas pipelines, plants and treatment facilities.
Production is weighted toward crude oil while growth opportunities are liquids focused, anchored by the Delaware Basin, SCOOP/STACK, Eagle Ford Shale, Canadian Oil Sands, and the Barnett. Devon also owns equity in the publicly traded midstream master limited partnership (MLP) EnLink.
Shareholders receive a 7.48% dividend. The Truist Financial target price is $115, and the consensus target is $78.03. Devon Energy stock closed almost 4% higher Tuesday at $70.88.
Enterprise Products Partners
This is the largest publicly traded energy partnership and a leading North American provider of midstream energy services to producers and consumers. Enterprise Products Partners L.P. (NYSE: EPD) provides a wide variety of midstream energy services, including gathering, processing, transportation and storage of natural gas, NGL fractionation, import and export terminaling, and offshore production platform services.
One reason many analysts may have a liking for the stock might be its distribution coverage ratio. This ratio is well above 1 times, making it relatively less risky among the MLPs.
Enterprise Products Partners stock investors receive a 7.04% distribution. The analysts at UBS have set a $33 price target. The consensus target is $31.42, and shares closed at $26.93 on Tuesday.
Exxon Mobil
Despite the huge rally in oil this year, this mega-cap energy leader trades at levels printed in 2015 and still offers investors an excellent entry point. Exxon Mobil Corp. (NYSE: XOM) is the world’s largest international integrated oil and gas company. It explores for and produces crude oil and natural gas in the United States, Canada, South America, Europe, Africa and elsewhere.
Exxon also manufactures and markets commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics, and specialty products, and it transports and sells crude oil, natural gas and petroleum products.
Top Wall Street analysts expect Exxon to remain a key beneficiary in this higher oil price environment, and most remain strongly positive about the company’s sharp positive inflection in capital allocation strategy, upstream portfolio, and leverage to a further demand recovery, with Exxon Mobil offering greater downstream/chemicals exposure relative to peers.
The company pays investors a 3.75% dividend, which will continue to be defended. The BofA Securities price target is $120. The consensus target for Exxon Mobil stock is $103.24. Tuesday’s close at $97.99 was almost a 4% gain for the day.
Phillips 66
This extremely diversified energy company has a long and successful operating history, and its stock has backed up nicely for conservative investors. Phillips 66 (NYSE: PSX) operates through four segments: Midstream, Chemicals, Refining, and Marketing and Specialties. The company holds many of its assets within its MLP, Phillips 66 Partners.
The company benefits from the tax-advantaged structure while still operating a more diversified operating business that also contains many assets that are not ideal MLP assets, such as its fast-growing chemical manufacturing business and its super-profitable refined products marketing business.
Phillips 66 remains a top idea across Wall Street banks with refining coverage, and many continue to see headroom for incremental capital returns from the company this year, and are very constructive on a positive rate of change at refining in 2022. In addition, they continue to see attractive non-refining value in the other segments.
The dividend yield is 4.40%. The Phillips 66 price target at BofA Securities of $123 compares to the $113.84 consensus target and the most recent close at $91.42, which was up close to 4% on the day.
TotalEnergies
This French integrated giant is a great way to play an energy rally from the European side. TotalEnergies S.E. (NYSE: TTE) operates as an integrated oil and gas company worldwide. Its Exploration & Production segment engages in oil and natural gas exploration and production activities in approximately 50 countries.
The Integrated Gas, Renewables & Power segment engages in the LNG production, shipping, trading and regasification activities; trading of liquefied petroleum gas (LPG), petcoke and sulfur, natural gas and electricity; transportation of natural gas; electricity production from natural gas, wind, solar, hydroelectric and biogas sources; energy storage activities; and development and operation of biomethane production units, as well as provides energy efficiency services.
The Refining & Chemicals segment refines petrochemicals, including olefins and aromatics; and polymer derivatives, such as polyethylene, polypropylene, polystyrene and hydrocarbon resins, as well as biomass conversion and elastomer processing. This segment also engages in trading and shipping crude oil and petroleum products.
The Marketing & Services segment produces and sells lubricants; supplies and markets petroleum products, including bulk fuel, aviation and marine fuel, special fluids, compressed natural gas, LPG and bitumen; and provides fuel payment solutions. It operates approximately 15,500 service stations.
Investors receive a 5.19% dividend. The $80 BofA Securities price target is well above the $64.24 consensus target. TotalEnergies stock closed over 3% higher on Tuesday at $54.70.
Brent and West Texas Intermediate crude are both 25% off of the intra-day highs printed back in March. With the Saudi Oil minister hinting that OPEC+ cuts could be in the works for the fall, energy stocks (especially the aforementioned seven top companies) may still be among the best ideas for investors, especially with the dangerous months of September and October right around the corner.
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