Oil prices might not go up forever, but right now oil is the profitable stock market play with exceptional year-to-date returns. Here are some of the top oil stock picks that could continue to perform well for the rest of 2022.
By David Granahan
- At a Glance
- Top Oil Stocks
- How To Invest
See: 5 Things You Must Do When Your Savings Reach $50,000
Top 8 Oil Stocks To Consider in 2022
Here’s a short breakdown of each of the picks, along with their current price and market capitalization.
1. Occidental Petroleum Corporation (OXY)
Occidental is one oil stock that many have added to their watchlist in 2022. There’s good reason for this, as the company has had the backing of the “Oracle of Omaha” himself, Warren Buffett. For those unaware, Buffett is renowned in financial circles as the greatest investor of all time.
Berkshire Hathaway, Buffett’s company, currently holds a 16.92% stake in Occidental. Since initiating a position, Berkshire Hathaway has not only retained its entire stake but has added to it along the way.
If that’s not enough to sway investors, the financials might. OXY went from a net loss of $346 million in Quarter 1 2021 to net income of $3.53 billion in Quarter 2 2022.
This radical increase boosted OXY’s valuation considerably, but the stock still sits at an attractive price-to-earnings ratio of 6.66.
If that’s not enough, the company also offers investors a 0.77% forward annual dividend yield and has a healthy $1.36 billion on its balance sheet.
Pros
- YTD return: Approx. 134%
- Backed by experts
- Attractive P/E multiple
- Decent cash pile
- 0.77% dividend
Cons
- Stock price appreciation may not be sustainable
2. Exxon Mobil Corporation (XOM)
Exxon is the largest oil and gas company in the U.S. by total revenue. It reported $19.66 billion in net income for the quarter ending Sept. 30, breaking last quarter’s record for largest quarterly profit in over seven years.
Following a drastic drop in 2020 due to pandemic-induced declines in demand for oil, Exxon has retraced to a valuation the stock hasn’t seen since 2014. Just recently, Exxon surpassed these levels to reach a new all-time high.
Exxon has a relatively low P/E ratio of 8.88 and a long-term track record of several decades of strong returns. It provides a dividend of 3.34% for its investors, and it’s unlikely to go under anytime soon.
YTD return: Approx. 78%
Long-standing history and industry experience
Record profits in 2022
3.34% dividend
Increasing competition from companies expanding shale oil holdings
3. Shell plc (SHEL)
Shell is one of Europe’s largest companies. Similar to Exxon, it has produced record profits in 2022, but even more so. Shell’s $18 billion second-quarter profit was the largest in the company’s history.
Recognized internationally due to its familiar red and yellow logo, Shell also has one of the strongest brands on this list. With the company’s roots dating back as far as the 1830s, Shell is one of the most experienced companies in the oil industry, and it’s reasonable to assume it will retain its leadership position in Europe.
Additionally, Shell is one of the oil stocks with the best value. It has a low P/E ratio of 4.64, as well as a 3.73% dividend yield. Cash on hand equates to $35.98 billion, a reasonably large sum for a stock valued at roughly $191 billion.
YTD return: Approx. 22.37%
Long-standing history and extensive industry experience
Low P/E ratio
Massive cash pile
3.73% dividend
Underperforming peers YTD
4. Marathon Petroleum Corporation (MPC)
Marathon Petroleum is the largest oil refiner in the U.S. Roughly 2.9 billion barrels of oil are refined every day. On top of its refining business, MPC has taken control of separate distribution channels.
It owns Speedway, the second-largest convenience store chain in the country. Speedway operates more than 3,900 stores nationwide with a presence in 36 states.
Even after a stellar performance YTD, MPC has a below-average P/E ratio of 7.82 and a mountain of cash on its balance sheet — $11.14 billion as it stands. It has beat analyst estimates for more than four quarters and also offers a 2% dividend yield.
YTD return: Approx. 81.06%
2% dividend yield
Diversified business
Limited international exposure
5. Marathon Oil Corporation (MRO)
Marathon Oil Corporation is not to be confused with MPC. The pair once traded as one but split in 2011. MRO is a separate business that is involved in oil exploration and production. The company focuses on low-cost, high-margin regions in the U.S. that are oil-rich. It has some exposure to oil internationally through Equatorial Guinea.
Taking a closer look at the financials, it’s clear Marathon Oil is a lot smaller than other oil stocks by market capitalization, sitting at just $20.43 billion. Marathon’s cash pile and dividend are on the low side at $1.11 billion and 1.18%, respectively.
However, it makes up for this elsewhere. Marathon bought back $1.35 billion worth of shares during the six months ending June 30, and it has increased its dividend six times in the last seven quarters. Both of these aspects inherently increase shareholder value.
YTD return: Approx. 86.54%
Dividend increases
Share buybacks
Limited international exposure
Low dividend
6. Imperial Oil Limited (IMO)
Imperial Oil has been in business for more than a century. It supplies fuels for both retail and marine customers and creates chemical products and asphalt pavings.
It has had a mixed performance in quarterly earnings reports over the last year, but the stock has seen continued momentum nonetheless. It has one of the highest levels of insider ownership from these picks at 75.95%, trades at a P/E multiple of 7.83 and has a dividend of 2.28%. However, the stock has an ex-dividend date of Dec. 1, meaning dividends will be paused on stocks purchased as of that date.
YTD return: Approx. 52.41%
High insider ownership
Diversified business
Going ex-dividend
7. Suncor Energy Inc. (SU)
Suncor is one of Canada’s largest companies focusing on developing one of the largest petroleum resource basins in the world. ESG investors should take note of the company’s excellent sustainability track record.
The company has recently bounced back, delivering significant earnings surprises of $1.32 and $0.30 in the second and third quarters, respectively. With a P/E ratio of 7.14, a 4.15% dividend yield and $2.7 billion sitting in cash, Suncor is another strong oil stock pick.
YTD return: Approx. 37.71%
Low P/E ratio of 7.14
Attractive 4.15% dividend
Investing in sustainability
Missed analyst expectations several times last year
8. Liberty Energy Inc. (LBRT)
Liberty Energy is unique in that it services oil and gas exploration companies. It tackles the oil industry from the angle of developing new technologies to serve existing oil businesses.
While it has an innovative business model, it has missed several quarterly estimates in the last year and only turned profitable in the second quarter of 2022. Liberty Energy has the potential to perform better in the long term and could be a good choice for speculative investors.
YTD return: Approx. 73.81%
Innovative long-term business model
Newly profitable
Missed estimates
How To Invest in Oil Stocks
You can invest by purchasing individuals stocks, or by purchasing a mutual fund or exchange-traded fund that invests in oil stocks.
Investing apps and online brokers typically have research you can review to learn more about companies and funds you’re interested in investing in. If you don’t already have a brokerage account, you’ll have to open one and fund it via a wire or electronic transfer from a bank account or payment app.
When you’re ready to buy, pull up the security you’ve chosen and tap the “buy” or “trade” button. Then enter the number of shares you want — or, if purchasing fractional shares, the dollar amount you want to spend — and submit the order.
Final Take
It’s a good idea to have some exposure to energy stocks in any portfolio. Oil stocks seem to be one of the most promising sectors to deliver returns in the final quarter of 2022.
Daria Uhlig contributed to the reporting for this article.
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What is the best oil stock to buy right now?
One of the best oil stocks to buy right now is Berkshire Hathaway-backed Occidental Petroleum, which trades under the ticker OXY.
Is oil a good stock investment?
Oil stocks are a good investment in the near term due to elevated demand and uncertain macroeconomic factors.
Are oil stocks rising?
Oil stocks rose quickly through the first half of 2022 and have maintained strong year-to-date gains. While the S&P Commodity Producers Oil & Gas Exploration & Production Index shows a loss of some of those gains since June, prices again are trending upward.
How are oil stocks doing today?
To get a sense of how oil stocks are performing on any given day, watch funds like the United States Oil Fund, which invests in oil futures contracts. Alternatively, search stock quotes for individual companies.
One of the best oil stocks to buy right now is Berkshire Hathaway-backed Occidental Petroleum, which trades under the ticker OXY.
Oil stocks are a good investment in the near term due to elevated demand and uncertain macroeconomic factors.
Oil stocks rose quickly through the first half of 2022 and have maintained strong year-to-date gains. While the S&P Commodity Producers Oil & Gas Exploration & Production Index shows a loss of some of those gains since June, prices again are trending upward.
To get a sense of how oil stocks are performing on any given day, watch funds like the United States Oil Fund, which invests in oil futures contracts. Alternatively, search stock quotes for individual companies.
Data is accurate as of Nov. 10, 2022, and is subject to change.
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- Reuters. 2022.
- “Exxon Posts Biggest Profit in Seven Years on High Oil Prices.”
- Forbes. 2022.
- “Forbes Global 2000: Shell Becomes Europe’s Top Public Company As Oil Price Boom Drives Profits.”
- Statista. 2022.
- “Brand Value of Leading Oil and Gas Companies Worldwide in 2022.”
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- “Marathon Oil Massive Buybacks Facilitate Covered Call Plays.”
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- “S&P Commodity Producers Oil & Gas Exploration & Production Index.”
