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 2023.
Top 8 Oil Stocks To Consider in 2023
Here’s a short breakdown of each of the picks, along with their current price and market capitalization.
|Occidental Petroleum Corporation (OXY)||$58.88||$52.542 billion|
|Exxon Mobil Corporation (XOM)||$106.23||$429.689 billion|
|Shell plc (SHEL)||$59.90||$202.126 billion|
|Marathon Petroleum Corporation (MPC)||$116.06||$49.953 billion|
|Marathon Oil Corporation (MRO)||$22.94||$14.165 billion|
|Imperial Oil Limited (IMO)||$51.40||$30.09 billion|
|Suncor Energy Inc. (SU)||$29.50||$38.672 billion|
|Liberty Energy Inc. (LBRT)||$13.63||$2.388 billion|
1. Occidental Petroleum Corporation (OXY)
Occidental is one oil stock that many added to their watchlist starting in 2022, when the “Oracle of Omaha” himself, Warren Buffett, began loading up shares for his company Berkshire Hathaway. For those unaware, Buffett is renowned in financial circles as the greatest investor of all time.
Berkshire Hathaway, Buffett’s company, currently holds a 24% 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 the first quarter of 2021 to net income of $3.53 billion in the second quarter of 2022. This radical increase boosted OXY’s valuation considerably, but the stock still sits at an attractive price-to-earnings ratio of 6.75.
If that’s not enough, the company also offers investors a 1.26% forward annual dividend yield and has a healthy $1.17 billion on its balance sheet.
- YTD return: Approx. -6.52%
- Backed by experts
- Attractive P/E multiple
- Decent cash pile
- 1.26% dividend
- Stock appreciated over 117% in 2022 and it 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 $11.43 billion in net income for the quarter ending Mar. 31.
Following a drastic drop in 2020 due to pandemic-induced declines in demand for oil, Exxon hit a new all-time high in early 2023. Exxon has a relatively low P/E ratio of 7.15 and a long-term track record of several decades of strong returns. It provides a dividend of 3.41% for its investors, and it’s unlikely to go under anytime soon.
- YTD return: Approx. -3.77%
- Long-standing history and industry experience
- Record profits in 2022
- 3.41% 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 in 2022 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 5.0, as well as a 3.60% dividend yield. Cash on hand equates to $42.07 billion, a reasonably large sum for a stock valued at roughly $203 billion.
- YTD return: Approx. 5.02%
- Long-standing history and extensive industry experience
- Low P/E ratio
- Massive cash pile
- 3.60% dividend
- Underperformed peers in recent years
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 in 2022, MPC has a minuscule P/E ratio of 3.56 and a mountain of cash on its balance sheet — $11.45 billion as it stands. It has beaten analyst estimates for more than four quarters and also offers a 2.65% dividend yield.
- YTD return: Approx. -0.34%
- 2.65% 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 $14.137 billion. Marathon’s cash pile and dividend are on the low side at $170 million and 1.81%, respectively.
However, it makes up for this elsewhere. Marathon bought back $334 million worth of shares in the first quarter of 2020 alone, and it has increased its dividend seven times over the past two years. Both of these aspects inherently increase shareholder value.
- YTD return: Approx. -10.69%
- 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 beaten earnings estimates for four quarters in a row, and the stock has seen continued momentum nonetheless. It trades at a P/E multiple of 5.80 and has a dividend of 2.95%.
- YTD return: Approx. 5.27%
- Continued earnings momentum
- Diversified business
- Low insider ownership of 0.02%
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 delivered earnings beats four quarters in a row. With a P/E ratio of 6.34, a 5.48% dividend yield and $830 million sitting in cash, Suncor is another strong oil stock pick.
- YTD return: Approx. 37.71%
- Low P/E ratio of 6.34
- Attractive 5.48% dividend
- Investing in sustainability
- Underperformed other major oil companies 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 missed several quarterly estimates in 2021 and only turned profitable in the second quarter of 2022. Since then, the company has beaten estimates four quarters in a row, but those earnings have also declined in each quarter. Liberty Energy has the potential to perform better in the long term and could be a good choice for speculative investors.
- YTD return: Approx. -14.52%
- Innovative long-term business model
- Newly profitable
- Declining earnings
How To Invest in Oil Stocks
You can invest by purchasing individual 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.
How To Choose Oil Stocks
When it comes to oil stocks, you’ll have to understand that they’re volatile and subject to the swings in the price of the commodity itself. Which stock is a good choice for you depends on your investment objectives and risk tolerance. Some will prefer relatively stable companies with very high dividends, while others might choose aggressive, speculative companies that could double in price but might not pay much income. Do some research to understand the difference between the two, and consider speaking with a financial advisor so that you’re matched up with the right type of oil stock.
Why Did Oil Stocks Drop Today?
If you find yourself investing in oil stocks for any period of time, you’ll encounter days — or even weeks or months — when oil stocks are down. The primary reason why oil stocks in general trade down is a weak economy. As demand for energy is a key factor in oil company earnings, a recession, or even a period of mildly softening economic conditions, can negatively impact oil stock share prices. Oversupply can also soften oil prices, again leading to depressed earnings. This gentle dance of supply and demand is one of the most important reasons for oil stock price fluctuations.
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 2023.
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Oil Stock FAQsHere are some common questions investors ask about oil stocks.
- 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.
Data is accurate as of July 5, 2023, and is subject to change.
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- CNN Business. 2022. "Oil Stocks Are the New FAANGs."
- Reuters. 2022. "Berkshire Buys More Occidental Shares, Boosts Stake to 15.2%."
- Statista. 2022. "Leading Oil and Gas Companies Based on Revenue in the United States as of 2022."
- 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."
- Barchart. 2022. "Marathon Oil Massive Buybacks Facilitate Covered Call Plays."
- Finviz. "Finviz."
- Yahoo Finance. "Yahoo Finance."
- S&P Dow Jones Indices. "S&P Commodity Producers Oil & Gas Exploration & Production Index."