Energy companies are printing mountains of money. It makes the recent selloff in oil stocks seem like a no-brainer buying opportunity. Given the strong correlation between companies in the industry, nearly all of them should rebound once buyers return to embrace equities. That said, I find the three oil stocks below particularly compelling.
As far as money printing goes, the energy sector saw eye-popping earnings growth of 290% versus the year-ago quarter, according to FactSet. Credit for the boon goes to ballooning oil prices. The average price of crude oil has gone from $66.17 in the second quarter of 2021 to $108.52 in Q2 this year. Wall Street has been quick to bid energy stocks back up, and the sector now finds itself in an uptrend.
Meanwhile, the S&P 500 just scored its best monthly gain (up 9.1%) since November 2020. It could be signaling the bull market is back and is yet another reason to buy oil stocks.
Oil Stocks to Buy Before the Bull Market Returns: Chevron (CVX)
Chevron (NYSE:CVX) shares soared following its most recent earnings report. Nearly quadrupling profits from a year ago will do that. Earnings leaped from $3.08 billion in Q2 2021 to $11.62 billion this year. Now flush with cash, the Texas-based energy giant increased guidance for its share buyback program from $10 billion to $15 billion.
Investors weren’t shy about returning to the stock they had only recently shunned. CVX made quick work gaining back the ground lost during its June swoon. Prices ripped 9.4% on the day following its release, marking the largest earnings response in years.
CVX stock is now trending higher above all major moving averages. Traders have set their sights on the old peak of $182.40. Consider it your target.
Occidental Petroleum (OXY)
Next up on our list of oil stocks to buy is Occidental Petroleum (NYSE:OXY). Robust earnings and consistent buying from Warren Buffett have driven its share price to the moon. In its just-released numbers, the Houston-based company scored $3.16 of earnings per share, marking a blockbuster 887% increase from the year-ago quarter. Revenue topped $10.7 billion.
The Oracle of Omaha has made waves in the stock. With his July purchase of another 12 million shares, Warren Buffett now commands a stake of nearly 20%.
On the price front, OXY stock held up relatively well during the recent downturn in energy stocks. The relative strength bodes well for the stock moving forward. With OXY back above all major moving averages, a return to the $74 peak seems likely.
Oil Stocks to Buy Before the Bull Market Returns: Devon Energy (DVN)
Devon Energy (NYSE:DVN) is a leading oil and gas producer prioritizing the return of capital to shareholders. Consider the growth in its quarterly dividends: 11 cents, 84 cents, $1, and $1.27. And the Oklahoma City company just announced a fixed-plus-variable dividend of $1.55 per share to be paid to shareholders of record as of Sept. 12. If the record payout continued for the next four quarters, it would constitute a whopping 10.5% dividend yield.
Its share price remains well off the highs achieved in June, leaving plenty of upside for price appreciation as the bull market marches on. In the short run, the 50-day moving average is proving stiff resistance. If you want more evidence that buyers have reversed the intermediate-term trend, consider waiting for a breakout above this level ($62.50) before jumping in.
On the date of publication, Tyler Craig 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.