To The Moon

The energy sector of the U.S. stock market offers many value investing opportunities, here are seven undervalued energy stocks:

1. $Devon(DVN)$

Devon is an independent energy company focused on oil and gas exploration, development, and production.With 60% of its oil assets in the Delaware Basin, it boasts a breakeven price as low as $40/BBL.

Devon produced a stronger-than-expected 664,000 barrels of oil equivalent per day last quarter and raised its full-year production guidance to 655,000 to 675,000 boe/d, which is expected to add $75.2 million to 2024 pretax profit.

Devon's committed to rewarding shareholders through dividends and share repurchases, currently sporting a payout ratio of just 39%.

2. $ConocoPhillips(COP)$

International oil and gas giant ConocoPhillips reported first-quarter earnings of $2.6 billion on operating cash flow of $5.1 billion and a 2% year-over-year increase in production.

In addition to the strong results, $Marathon Oil(MRO)$ acquisition is expected to generate $2.5 billion to $3.5 billion in EBITDAX over the next five years.

Conocophillips raised its annual share buyback target to $7bn from $5bn and plans to buy back $20bn of shares over the first three years after completion. In addition, the company plans to raise its dividend by 34% this year.

3. $Occidental(OXY)$

Occidental, an international oil and gas explorer, trades at a forward P/E of 14.9x, lower than its 12-month average of 16x.

Analysts recommend buying this oil stock with an average target price near $73, suggesting a 19% upside. Warren Buffett's $Berkshire Hathaway(BRK.B)$ $Berkshire Hathaway(BRK.A)$ keeps adding to its OXY stake and inked a lithium extraction joint venture, opening up new green energy avenues for Occidental.

4. $Valero(VLO)$

Refining giant Valero operates 15 refineries worldwide, churning out roughly 2 million barrels per day. Its Diamond Green Diesel venture could boost margins. Q1 2024 EBITDA margins jumped from 41 cents/gallon to 76 cents/gallon YoY, poised for further gains.

Valero's stock trades at a P/E of 7x, roughly 30% below the industry median.

5. $Baker Hughes(BKR)$

Baker Hughes, a US oilfield services company, stands to gain from rising demand for natural gas and hydrogen. Its gas technology segment shone in the last quarter, and orders are projected to surge 50% next fiscal year.

With LNG becoming a key segment and US LNG exports poised to rise, Baker Hughes might surprise investors with robust Q2 earnings.

6. $Halliburton(HAL)$

Small-cap energy company Halliburton could benefit if Donald Trump wins the U.S. presidential election, as the Trump administration pushes for interest rate cuts and deregulation of the industry, helping the company to rapidly increase capital spending.

In addition, Halliburton is the most favored energy stock among analysts on this list, with 8 "Strong Buy" ratings and a 44% upside potential.

7. $Phillips 66(PSX)$

Phillips 66 is one of the largest and most diversified independent refiners in the US, shifting focus to more predictable midstream and chemicals segments. The DCP Midstream acquisition should bolster EBITDA, while high-margin petrochemical ventures promise sustainable cash flows.

In addition, the stock currently has a static P/E of only 10.2x and a dividend yield of 3.5%.