5 Best Oil and Gas Stocks to Buy in November 2021

The fortunes of oil and gas companies are intertwined with energy prices. Crude oil prices recently surged to the highest level since 2014 and some of the brokerages including Goldman Sachs and Bank of America see more upside in crude oil prices.

Meanwhile, crude oil prices, as well as oil and gas stocks have come off their 2021 highs. However, despite the long-term transition towards green energy, some of the fossil fuel stocks look like good buys for the short to medium term. Here are five such stocks.

1. Chevron (NYSE: CVX)

Chevron stock is up about 36% for the year and is underperforming some of the energy stocks even as it is outperforming the broader markets. However, with a strong balance sheet and a dividend yield of 4.6%, which is over thrice that of the S&P 500’s dividend yield, Chevron looks among the best oil and gas stocks to buy in November.

Bank of America finds CVX a good oil stock to buy

Bank of America is bullish on Chevron and finds it a good oil stock to buy. It said that Chevron’s “current portfolio visibility top line growth is modest.” However, it added, “Still, CVX retains one of the most levered portfolios to oil prices given a business mix skewed to upstream and production skewed towards oil, capacity to accelerate per share growth in cashflow and dividends positions the shares as a conservative beta play in the current commodity cycle, in our view.”

Wall Street analysts have a mixed view on CVX stock and it has 19 buys and 12 hold ratings. The stock’s median target price of $129.50 is a premium of 12.2% over current prices.

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2. ConocoPhillips (NYSE: COP)

JPMorgan listed COP as among the best stocks in the energy industry if crude oil were to hit $100 per barrel. COP is the largest crude oil producer in Alaska. It has globally diversified operations. With a YTD gain of around 81%, COP is among the top 25 gainers in the S&P 500 this year.

COP is acquiring oil assets from Shell

In September, COP announced that it would buy Shell’s Permian Basin oil assets for $9.5 billion in cash and the deal is expected to close in the current quarter. Wall Street analysts are also quite bullish on COP stock and of the 29 analysts that actively track ConocoPhillips, 25 have a buy rating and four have a hold rating. Its median target price of $90 is a premium of 25% over current prices. The stock’s street-high target price of $117 is a premium of 62.5%. It even trades 1.4% below the street low target price.

While leading oil companies like Shell and BP are disposing of their fossil fuel business, COP is expanding its portfolio. If you are looking for an oil and gas stock that is increasing its production, COP should be on your radar.

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3. BP Plc. (NYSE: BP)

British energy giant BP is among the best oil stocks that you can buy in November 2021.  Meanwhile, apart from the fossil fuel business, BP is also a play on renewable energy. It has been diversifying its business and is also investing in hydrogen and renewable energy. The company has been exiting some of the fossil fuel business and has been investing aggressively in renewable energy. While these projects might not lead to immediate returns, they would add long-term shareholder value as the world transitions towards a low carbon future.

BP is an oil and gas stock investing in renewables

BP has already sold $15 billion worth of assets under its CEO, Bernard Looney. Within the green energy space, BP is also betting on hydrogen. It plans to have the largest blue hydrogen facility in the UK. It is also targeting a double-digit market share in clean hydrogen by 2030 in its core markets.

If you want exposure to oil and gas as well as renewable energy, you can consider BP stock. In the short term, it would benefit from the strength in crude oil prices. However, in the long-term, it would benefit from its investments in renewable energy.

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4. Magellan Midstream Partners (NYSE: MMP)

The energy ecosystem is quite diverse. Apart from the upstream companies, we also have midstream pipeline companies that transport oil and gas to downstream refining companies. While major energy companies have integrated operations, we also have pure-play midstream pipeline companies. These companies are generally known to pay good dividends.

MMP is a play in the midstream oil and gas industry

With its dividend yield of 8.6%, MMP is a good midstream oil and gas stock to buy in November. MMP transports and distributes crude oil and refined petroleum products based in Tulsa, Okla. It has a 9,800-mile refined products pipeline system and another 2,200 miles of crude oil pipelines. Generally, midstream companies are less volatile as compared to upstream oil and gas companies.

Wall Street analysts have a consensus hold rating on MMP stock. Of the 23 analysts covering the stock, seven rate them as a buy while 15 have a hold rating. One analyst has a sell rating on the stock. Its median target price of $53.50 is a premium of over 12%.

If you are looking for a midstream oil and gas stock with a high dividend yield, MMP would fit the bill.

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5. Energy Select Sector SPDR Fund (NYSE: XLE)

If you want to build a portfolio of oil and gas stocks without having to worry about selecting and buying individual stocks, you can consider one of the many energy ETFs.

XLE is a good ETF to play the energy industry. It invests in oil, gas, and consumable fuels, and energy equipment and services. XOP is mainly an upstream energy ETF. The ETF has total assets of $26.8 billion and has a gross expense ratio of 12 basis points annually.

As of yesterday, the ETF had 21 holdings with a blended forward PE multiple of 14.9x and a price to book multiple of 1.9x. The ETF has a large-cap bias and the average market cap of the constituents is $129 billion. The ETF has risen 56% so far in 2021 amid the rise in oil and gas stocks.

ETFs can be a good investing strategy especially for investors who lack the time or analytical skills to pick individual stocks. The charges in an ETF are much lower than active funds.

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