Three energy stocks on Josh Brown's list are outperforming as M&A activity ramps up
(This is The Best Stocks in the Market , brought to you by Josh Brown and Sean Russo of Ritholtz Wealth Management.) Josh — Last week, natural gas producer EQT (EQT) agreed to buy Range Resources (RRC) in a roughly $13 billion all-stock deal. Oil and gas companies have been merging for a couple of years now, and the survivors keep getting bigger. Three of them are on the list today. The one furthest ahead is ConocoPhillips (COP) , one of the largest independent oil and gas producers in the world. As Sean walks through below, Conoco did its own version of that deal with Marathon Oil in 2024, and the combined company is now producing a record amount out of the Permian. Earnings more than doubled from a year ago, and management is sending close to half of its cash flow back to shareholders. We first wrote about Delaware Basin producer Devon Energy (DVN) on Feb. 2, the day the Coterra deal was announced, and again when the merger closed on May 7. The stock is up 29% and 11% since those two columns. We also own Devon for clients in our Porterhouse Concentrated Momentum Strategy , so we have skin in the game on this one. Occidental Petroleum (OXY) rounds out the group today. Berkshire Hathaway (BRK.B) owns about a quarter of the company. Sean’s got the usual Monday morning highlights from the list. I’ll be back with some technical commentary and risk management. As of Nov. 2, there are 161 names on The Best Stocks in the Market list. Top sector ranking: Top industries: Top 5 best stocks by relative strength: Spotlight: Oil & gas exploration and production (E & P) ConocoPhillips (COP): Sean — EQT agreed to buy Range Resources last week in a roughly $13 billion all-stock deal, the latest in a run of E & P consolidation during this oil bull market. ConocoPhillips did its version with Marathon Oil in 2024 and now produces 2.25 million barrels of oil a day, including a record 900,000+ in the Permian, with LNG exposure through Qatar and Port Arthur. COP is trading at $154, up 64% YTD and 76% over the past year on a total return basis, just above its prior 52-week high. Q2 adjusted EPS was $3.24 versus $1.42 a year ago on $7.2 billion of cash from operations, this company is gushing! The capital returns story is even better. COP distributed $9.0B in 2025, or 45% of cash from operations ($5.0B in buybacks and $4.0B in dividends), and the 45% target is unchanged for 2026 on a much bigger cash flow. Q1 returned $2.0B and Q2 returned $3.0B as buybacks doubled to $2.0B. The dividend is $0.84 a quarter versus $0.78 a year ago, and management expects free cash flow to grow by $7B by 2029 without cutting the payout ratio at all. Risk management: Josh — ConocoPhillips has already broken out, so what we’re talking about is managing the position on its way up. COP cleared its September high of $142 on Oct. 14 and hasn’t looked back. That high came on Sept. 15, and the stock gave all of it back in two weeks, falling to $123 on Sept. 29 and slicing through the 50-day on the way down. Buyers took it from there. The stock ran to $154 and the old high turned into support. It pulled back to $143 on Oct. 20 and again on Oct. 22, right on top of the level it had just cleared, and held both times. The 50-day is rising at $136 and the 200-day at $121. There is no overhead resistance whatsoever so the only sellers are profit-takers. We’re at fresh 52-week highs. RSI at 74 so momentum is running hot, which comes with a stock making fresh highs. It got here from the high 30s in late September, so the run started from a washed-out reading. Anyone adding here is paying up. A pullback to the old high would let RSI reset without touching the structure. Traders can use $142 as their stop. That’s the September high the stock cleared in mid-October, and both October pullbacks held right above it. A close below it and the breakout has been given back. It’s a tight leash, and that’s the point. Investors can anchor to $136. The stock stalled right there in early October before clearing it on the 12th, so old resistance became support, and the rising 50-day sits at the same spot. A weekly close below $136 and the October breakout has failed. Devon Energy Corp. (DVN): Sean — We wrote about Devon on Feb. 2 (the day the Coterra deal was announced) and again at the May 7 merger close. DVN closed at $40.21 before the first piece and $46.60 before the second, and now trades at $52, up 29% and 11% in price since, and up 42% YTD on a total return basis. Devon is a Delaware Basin focused producer that added Coterra’s gas assets and 532 million new shares, with Q3 as the first full quarter of the combined company. Devon also agreed to sell its Eagle Ford assets, about 4% of production, to Crescent Energy for $4.2B in cash, with the after-tax proceeds going to accelerate buybacks and reduce debt. Also, Toms Capital, now a top-five activist shareholder, is urging a sale of the company arguing the stock trades at too steep a discount, with a current multiple of about 4.5x 2027 EBITDA. Which, in fairness, does seem pretty cheap! On returns, the fixed dividend went up 33% to $0.32 from $0.24, and the buyback authorization is $8 billion ($7.8 billion remaining), up from the prior $5B program. In the seven weeks after the merger closed, Devon returned $1.06 billion to shareholders: $366 million of dividends, about $200 million of buybacks and $500 million of debt paydown. That compares with $405 million returned in Q2 2025, or about $570 million excluding the debt paydown. The CEO said on the Q2 call that with the 2026 debt goal met, “you’ll see us differentially move towards buybacks,” which we love to hear. Risk management: Josh — This is the best set-up of the group for the near-term. Devon is pressed up against the same ceiling for the fourth time. The March high came in at $53, the May high at $52 and the September high at $52, and each one reversed. The September reversal took the stock to $46 by the end of the month, right on the 200-day. Buyers came back, and the dips have gotten shallower since. The stock has held above $48 on every pullback in October and sits at $52, with the 50-day rising at $49 and the 200-day at $46. The buyback and activist story Sean described above gives those buyers a reason to be here. $53 is the level. A close above it puts DVN at fresh 52-week highs. With RSI at 64, momentum is building into the ceiling instead of arriving stretched. It was well above 70 at the March high and near 70 at the September high. This time the stock gets another shot at $53 from a lower reading. The September selloff took RSI down to about 40 and the stock found its footing, which leaves room for this attempt. Traders can use $48 as their stop. That’s the Oct. 22 wick low, with the Oct. 12 and 15 lows stacked just above it and the rising 50-day at $49 on top. A close below it and the stock is back in the old range. That’s the cheapest way to learn whether this trade works. Investors can anchor to $45. The late September and early October wick lows came in right around there, with the rising 200-day at $46 sitting just above them. That’s not an accident. A weekly close below $45 and the uptrend that started in July has failed. Occidental Petroleum Corp. (OXY) Sean — Per Berkshire’s 13F filed Aug. 14 for the quarter ended June 30, it holds 264.9 million OXY shares, about 26.5% of the common shares, unchanged from the prior quarter. It also owns roughly $8.5 billion of 8% OXY preferred and warrants on 83.9 million shares at about $59.60, which are now in the money with OXY at $64. Berkshire bought OxyChem from Occidental for $9.7 billion in cash, which closed Jan. 2. This was a big buy for Warren and the new leadership has continued to hold. OXY is up 55% YTD and 58% over the past year on a total return basis, about 5% below its 52-week high of $67.45. The fundamentals are interesting here as OXY has a big chunk of debt. Q2 free cash flow before working capital was $3 billion, the highest since Q3 2022, on $1.6 billion of capex. Occidental repaid $8.6 billion of debt in the first half of the year mostly with OxyChem proceeds, and has repaid $17.1 billion over 24 months, bringing principal debt to $11.8 billion against a $10 billion target. Annualized interest expense is down $630 million from 2025 to $760 million. The dividend went up 8% to $0.28, but management calls buybacks opportunistic and a lower priority until the preferred equity is redeemed in 2029. Risk management: Josh — Occidental ran to $67 in March and has spent the months since underneath it. The July low came in the high $40s, and the stock has worked higher ever since. It closed above its September high of $64 on Oct. 23 and has held a range between $61 and $65 since the middle of the month. The Berkshire backdrop Sean described above is the context. The 50-day is rising at $60 and the 200-day at $56. The Oct. 23 high at $65 is the level to clear, with the March high at $67 behind it. RSI is 64, a notch below the readings near 70 in mid-September and again on Oct. 23. Price has gone sideways for a week and a half while RSI cooled, and the stock didn’t give any ground. That’s the kind of consolidation you want to see sitting next to a ceiling. Traders can use $61 as their stop. That’s the Oct. 20 and 22 wick lows, the floor of the current range. A close below it and the stock is back inside the September to early October chop. This one gives you a verdict quickly. The 50-day at $60 has been crossed too many times this year to trust, so you can ignore it. Investors can anchor to $55. The Sept. 29 and 30 lows both came in right there, with the rising 200-day at $56 just above. A weekly close below $55 and the post-July trend is in question. The trader stop I’m showing you here is around 5% so if you want to give this one some more leash, use the $55 level for investors instead, which is more like 14%. DISCLOSURES: Porterhouse , our concentrated momentum strategy, owns shares of Devon Energy (DVN). See further disclosures here . Sean Russo also owns DVN personally. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
