Investing Whiz Bob Doll says these high-quality energy stocks can thrive in a volatile market

A look at the year-to-date charts of the major stock market indexes shows that the downtrend is volatile. It was marked by short rallies that ran out until the pattern repeated itself. This creates a confusing environment for investors.

And we’re not out of the woods yet, says former BlackRock director of equities and Crossmark CIO Bob Dole. According to him, the markets will deteriorate in the short term, perhaps retesting the recent lows near 3,500. Dole noted that the Federal Reserve has “only” raised interest rates to a range of 3.75% to 4% and that this is likely not enough to contain inflation.

With that in mind, it’s up to investors to find stocks that will earn in the future no matter how the market moves, and Dole has some advice, too.

“I don’t think you should roll the dice and take a lot of portfolio risk. Good solid companies that sell at reasonable prices; or they have good cash flow … those are the things I try to focus on … Energy companies are making a ton of money … They’re very disciplined this time, which is great for financial returns and for investors,” Dole said.

In particular, Doll recommended two high-quality energy stocks that have proven they can thrive in volatility. We dug deeper TipRanks database to see what Wall Street analysts have to say about whether these stocks make compelling investments. Let’s take a closer look.

Marathon Petroleum Corporation (MPC)

We’ll start with Marathon Petroleum, an old name in the oil industry and currently the largest producer of refined petroleum products in the North American market. The company boasts a market capitalization of $54 billion and shares that are up 85% year-to-date, far outperforming the broader markets. Marathon’s strength is based on its operations: 13 active refineries operating in 12 states with a combined capacity of 2.9 million barrels of crude oil per day.

A continent-wide operation in an important industry, Marathon brought in $47.2 billion in revenue in the recently reported 3Q22, a 45% increase from the same period last year. The company reported adjusted net income of $3.9 billion, or $7.81 per diluted share. The EPS number rose from just 73 cents in 3Q21.

So the company is profitable and showing strong stock appreciation in a tough environment. Also of note to investors, Marathon Petroleum also announced a Q4 dividend, to be paid on December 12, of 75 cents per common share. That’s a 30% increase over the quarter, and on an annualized basis, the new dividend comes to $3 per common share. At that rate, its yield is 2.6%, slightly above the average for companies listed in the S&P 500. Marathon has maintained reliable dividend payments for the past 11 years.

All this has impressed 5-star analyst Raymond James Justin Jenkins, who wrote for MPC: “We believe relative momentum will continue as the refining macro still maintains margins well above mid-cycle (and record cracks in October). While MPC met its capital distribution and shareholder return goals, excellent operations, a supportive refining macro, and management’s continued focus on returns compel MPC to be our top refining pick even after a dramatic outperformance over the past two years. .”

To that end, Jenkins rates MPC stock as a strong buy, and his $150 price target suggests it has 29% upside potential over the next year. (To watch Jenkins’ record, Press here)

Wall Street is definitely falling with the bulls on these stocks. The stock has 13 recent analyst reviews and they break out at 10 buys over 3 holds for a strong consensus buy rating. (See the MPC stock forecast at TipRanks)

ExxonMobil Corporation (XOM)

The second energy stock pick on the Dole list is ExxonMobil, one of the world’s largest crude oil and natural gas exploration and production companies. ExxonMobil has a hand in many things, from hydrocarbon exploration on the global stage to the US refined products market to the development of new energy sources and more efficient fuels to power a low-carbon or zero-carbon future.

It takes a big company and a rich wallet to manage all this. ExxonMobil, with its $448 billion market cap, qualifies. The company maintains its size with stellar quarterly results—it posted a profit of more than $112 billion in the recently reported 3Q22, up 52% ​​year-over-year. For the first nine months of this year, ExxonMobil generated $318 billion in revenue, compared with $200 billion for the same period in 2021.

As for earnings, the company made $19.7 billion in the most recent third quarter. That amounts to $4.68 per diluted share, compared to $1.58 EPS in the year-ago quarter. The company’s cash flow increased in the third quarter by $11.6 billion, and free cash flow, which helps support dividend payments, reached $22 billion.

The dividend is worth mentioning. ExxonMobil announced a payment of 91 cents per common share for the fourth quarter, up 3 cents from the prior quarter and payable on Dec. 9. With an annualized rate of $3.64 per common share, the dividend yields 3.2%, well above average. XOM has supported reliable payments for 14 years.

Along with growing top and bottom lines, ExxonMobil shares have been gaining all year. The stock is up an impressive 84% year-to-date, outperforming the broader markets by a wide margin.

Covers shares of Jefferies, 5 star analyst Lloyd Byrne believes that this name can have even more profits in the future.

“We believe Exxon has built a compelling investment case… XOM is on the front foot and we see attractive risk/reward, particularly for generalists needing energy exposure… We see Exxon’s financials as steady as the company rationalizes its cost structure and uses the higher oil and gas environment to repair its balance sheet. At the same time, XOM continued to reinvest in longer-term projects across the energy chain,” Byrne said.

“With strong financials and an industry-leading upstream and downstream portfolio, we believe Exxonis is positioned to outperform over the medium term,” the analyst concluded.

All this, according to Byrne, justifies a Buy rating, along with a price target of $133. If the target is met, there could be a twelve month gain of ~22%. (To watch Byrne’s record, Press here)

Overall, XOM stock has received an endorsement from 12 analysts, who collectively give the stock an 8-to-4 preference for buys over holds for a moderate consensus rating of buy. (Check out the XOM stock forecast at TipRanks)

To find good ideas for trading energy stocks at attractive valuations, visit TipRanks’ The best stocks to buya tool that brings together all of TipRanks equity insights.

Rebuttal: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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