There are several ways to examine the market and research new ideas that retail investors might suffer from analysis paralysis and avoid taking any views or exposure to what could have been a winning idea. To avoid falling into this behavioral tendency, one way to reverse engineer a potentially winning position is to watch out for 13-F filings.
These are mandatory and regulatory filings that hedge funds and other investment entities must make every quarter. The objective is to inform the public about their current holdings and the stocks they bought or sold during the quarter. This is one data point that retail investors can use to find and dig deeper into potentially winning stocks.
As of the latest 13-F filings of the quarter, a few stocks stand out as buys from institutions and carry enough fundamental reasoning and tailwinds to make them potential research targets for retail investors today. Interestingly enough, these two have to deal with the energy sector and are riding on the upcoming wave of oil demand sparked by interest rate cuts from the Federal Reserve (the Fed); these stocks are Occidental Petroleum Co. (NYSE: OXY) and First Solar Inc. (NASDAQ: FSLR) as a renewable energy play.
Why Occidental Petroleum Stock Is a Top Buy in the Oil Industry
First, investors need to know who is interested in being exposed to Occidental Petroleum stock so that a sense of authority and quality can be established as a foundation for further research justification. Warren Buffett decided to buy this oil name, but this was no ordinary buy for the Oracle of Omaha.
During the same quarter, Buffett dumped 50% of his holdings in Apple Inc. (NASDAQ: AAPL) and a significant reduction in the financial sector in shares of Bank of America Co. (NYSE: BAC). With this new liquidity, he chose to go into the energy space, buying up to 29% of the entire stock of Occidental Petroleum.
So, Buffett finds not only the size of the position unusual but also the rotation itself. His view is the underperformance of consumer discretionary items like Apple products and the underperformance of the financial sector, where Bank of America could be a victim. More than that, in these environments, oil prices tend to do well simultaneously.
Far from only focusing on Buffett’s buy in Occidental Petroleum, investors can extrapolate the views behind this decision and adjust their portfolios according to these two shifting preferences in the cycles affected by bullish oil. Nonetheless, investors would also benefit from sticking to a deeper dive into Occidental Petroleum stock, particularly since it is lower than where Buffett bought it.
Occidental Petroleum now trades at only 72% of its 52-week high price, giving investors enough of a gap to narrow in the coming quarters. Wall Street analysts think the stock should be trading closer to the consensus price target of $66.3 a share, calling for a net upside of 21.3% from where it trades today.
However, there are those willing to place their bullish views to the test, as analysts from Mizuho Financial landed on a new price target of as high as $72 a share. To prove these outlier views correct, the stock would need to rally by a much higher upside of 32% from where the stock sits today.
According to analysts at Goldman Sachs, the price of oil could rise in the coming months due to business demand and, geopolitical issues and shocks stemming from today’s conflicts across the Middle East. While that’s good for Occidental, it’s also good for other stock institutions that have been buying.
How Rising Oil Prices Could Drive Increased Solar Demand and Boost First Solar Stock
When oil prices go up, the cost of most energy sources tends to follow. From gas prices at the pump to electricity, natural gas also increases as a derivative and is correlated with oil. In these environments, alternative energy sources become more attractive for users and investors alike.
This is where First Solar stock comes into play. It offers solar energy as one of the most accessible and developed alternative energy sources available in the market today. According to the 13-F filings for the past quarter, up to $747.9 million worth of buying has come from institutional investors.
Knowing that all of the current tailwinds surrounding the stock are there and institutional buying interest is trickling in now, analysts at Bank of America decided to boost the stock’s price target as recently as October 2024. This time, the price targets have been set at $321 a share, calling for up to 56.5% upside from where the stock trades today.
Like Occidental Petroleum stock, First Solar stock trades at a discount to its highs, this time at 83% of its 52-week high, to offer investors a reasonable gap for upside. To crystalize the potential upside in this stock, investors can consider the earnings per share (EPS) growth forecasts set by Wall Street today.
Expecting $4.08 in EPS over the next 12 months would call for a jump of as much as 25.5% from today’s $3.25 EPS level, justifying the upside potential today for First Solar stock.