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 indices shows that the bearish trend has been choppy. It is characterized by short rallies that sputter until the pattern repeats. This creates a confusing environment for investors.

And we’re not out of the woods yet, says former BlackRock Stock Chief and Crossmark CIO Bob Doll. In his view, markets will deteriorate in the near term, perhaps by retesting the recent lows at 3,500. Doll notes that the Federal Reserve has “only” raised interest rates to 3.75% to 4%, and that this probably isn’t enough to contain inflation.

With this in mind, the job for investors is to find stocks that will win in the future no matter how the market moves, and Doll has a bit of advice there as well.

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

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

Marathon Petroleum Corporation (MPC)

We 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 has a market cap of $54 billion and shares that have gained 85% to date, far outperforming the broader markets. Marathon’s strength lies in its operations: 13 active refineries, operating in 12 states, with a combined capacity of 2.9 million barrels of crude oil per day.

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

The company is thus profitable and shows a strong valuation of the stock in a difficult environment. Also of interest to investors, Marathon Petroleum also announced a Q4 dividend, payable Dec. 12, of 75 cents per common share. This is a 30% increase on a quarterly basis and on an annualized basis, the new dividend comes in at $3 per common share. At that rate, it returns 2.6%, slightly more than the average of companies included in the S&P 500. Marathon has maintained reliable dividend payments for the past 11 years.

All of this has impressed Raymond James’ five-star analyst Justin Jenkins, who writes of MPC: “We believe relative momentum will continue as the refining macro continues to support well above midcycle margins (also registering October cracks). ). While MPC has delivered on its capital allocation and shareholder return objectives, excellent operations, a supportive refining macro and continued management focus on return make MPC our top choice, even after having dramatically outperformed over the past two years…”

To that end, Jenkins rates MPC stock as a strong buy, and its $150 price target suggests it has 29% upside potential for the coming year. (To view Jenkins’ track record, click here)

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Wall Street is definitely down with the bulls on these stocks. The stock has 13 recent analyst reviews and comes in at 10 Buys over 3 Holds in a Strong Buy consensus rating. (See MPC stock forecast at TipRanks)

ExxonMobil Corporation (XOM)

The second pick for energy stocks on Doll’s list is ExxonMobil, one of the world’s largest exploration and production companies for crude oil and natural gas. ExxonMobil has its fingers in many jars, from hydrocarbon exploration on the global stage to the US market for refined products to developing new energy sources and more efficient fuels to power a low-carbon or net-zero future.

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

The company made $19.7 billion in profit in the recent third quarter. This came in at $4.68 per diluted share, compared to $1.58 in earnings per share in the year-ago quarter. The company’s cash flow grew $11.6 billion in the third quarter, and free cash flow, supporting the dividend payment, came in at $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 December 9. At the annualized rate of $3.64 per common share, the dividend yields a 3.2%, well above average. XOM has been keeping reliable payments for 14 years.

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In addition to rising top and bottom lines, ExxonMobil’s stock has been up throughout the year. The stock is up an impressive 84% since the start of the year and is significantly outperforming the broader markets.

Five-star analyst Lloyd Byrne, who hedges the stock for Jefferies, thinks this name could bring even more profit.

“We believe Exxon has created a compelling investment case… XOM is ‘on the forefront’ and we see attractive risks/rewards, especially for generalists who need energy exposure… We see Exxon’s financial position as solid As the company rationalized cost structure and leveraged the higher oil and gas environment to restore its balance sheet, XOM continued to reinvest in long-term projects in the energy chain,” Byrne said.

“With strong financials and a leading upstream and downstream portfolio, we believe Exxon is positioned to outperform in the medium term,” the analyst summed up.

All of this justifies a buy rating, along with a price target of $133, according to Byrne. If the target is met, a gain of approximately 22% could be achieved over 12 months. (To view Byrne’s track record, click here)

All in all, XOM stock has received the approval of 12 analysts, who collectively give the stock an 8 to 4 advantage in Buys over Holds for an average buy consensus valuation. (See XOM Inventory Forecast at TipRanks)

To find great ideas for trading energy stocks at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that brings together all of TipRanks’ stock insights.

Disclaimer: The opinions expressed in this article are those of the recommended analysts only. The content is for informational purposes only. It is very important to do your own analysis before making any investment.