In January 2020, CNBC’s Jim Cramer said oil stocks were in the “death knell” phase. Since then, things have changed, and so has his outlook.
A more “disciplined approach” to capital spending, Cramer says, could mean further upside for oil stocks despite a remarkable rally this year. The S&P Oil & Gas Exploration & Production Select Industry Index (SPSIOP) is already up more than 50% on a year-to-date basis.
On Thursday’s episode of “Mad Money”, he picked the following four oil producers that investors “should be willing to own”.
Devon Energy
Cramer likes Devon Energy Corp (NYSE: DVN) for its variable dividend that shares a cut of the company’s profits with the investors instead of a fixed payout. The stock has more than doubled already since the start of the year, but Cramer is convinced that there’s more to come. He said:
I like it up here because, based on the way they calculate the variable dividend, it works out to be one of the best yields in the S&P 500.
Pioneer Natural Resources
Pioneer Natural Resources Co (NYSE: PXD) owns valuable assets in the Permian Basin that could be worth more in the future, but Cramer primarily likes this one also for its variable dividend that it implemented shortly after Devon. He said:
Based on what they paid lasts quarter, the stock’s got a 5.2% yield, although it should be higher than that based on the company’s cash-flow estimates for the next five years.
Diamondback Energy
Diamondback Energy Inc (NASDAQ: FANG) has also announced plans of switching to variable dividend once the stock goes “high enough”. For now, it is rewarding shareholders with a $2.0 billion share repurchase program, which was sufficient to find it a spot on Cramer’s list.
Chevron
For investors who want to play it safer, putting their money in oil giants, Cramer picked Chevron Corp (NYSE: CVX) as his favourite integrated oil company.
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Wajeeh Khan
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