After this year's World Economic Forum meeting in Davos, Switzerland, President Trump laid out many new policies for the entire world—and financial markets—to see. One of the main pressing points in the conference was the need for lower oil prices and the new president's demand for interest rates to be lowered immediately, leaving investors with a couple of conclusions to make.
The first is that lower oil prices might negatively impact the energy sector; however, the risk-to-reward setup in the space seems more favorable than ever. After a couple of years of bearish price action, what may seem like a bearish development is actually a new bull market in disguise.
The reasons for this have to do with new trade activity and relationships and the new agenda to bring back the domestic manufacturing sector in the United States.
Retail investors can connect the dots today and land on the right side of history by picking the best names in the energy space and outperforming the market in 2025. These names include companies like Occidental Petroleum (NYSE:OXY), Chevron (NYSE:CVX), and even Transocean (NYSE:RIG). This selection mixes value, momentum, and growth to cater to different portfolios in this new run, leaving investors spoiled for choice.
For Value Hunters: Occidental Petroleum Stock Fits the Bill
This domestic oil producer's stock has traded down to 70% of its 52-week high, leaving investors fearing a potential continuation of bearish price action. However, they can count on the backing of Warren Buffett, the market’s most renowned value investor.
Buffett himself has picked Occidental Petroleum stock to express a bullish view on the oil market this year. He bought up to 29% of the company when he had been increasing his cash position and reserves. This is why investors might consider this one for themselves as well.
The low price and a valuation discount compared to the industry will allow investors to tap into double-digit upside. Occidental Petroleum stock trades at a price-to-book (P/B) multiple of 2.0x today, less than half the energy sector’s average 4.4x valuation today.
This is why Mizuho analysts found it easy to keep a valuation of up to $70 a share of the stock as of December 2024. To prove this view right, Occidental Petroleum stock would have to stage a rally of up to 38.8% from where it trades today, giving investors their fair share of a value play.
Chevron Stock’s Momentum to Continue
Shares of Chevron represent the international oil play, which has also gained the market’s favor through bullish momentum. As of January 2025, the stock trades within 10% of its 52-week high, and if price action is any indication, this is the first bullish pillar on which investors can lean.
Knowing that the recent dips in oil are only temporary, even bearish traders have decided to leave the scene recently, as investors can see in the 4.6% decline in short interest over the past month alone, a sign of bearish capitulation at its finest. Wall Street analysts also came in to reiterate the reasons why these short sellers might be fleeing.
Current earnings per share (EPS) forecasts are set for $3.90 in the same quarter next year, which is a massive boost of 55.3% from today’s $2.51 level. Given that stock prices tend to follow underlying EPS growth, it would be no surprise for investors to see analysts from the UBS Group reiterate double-digit upside potential.
As of December 2024, these analysts kept a buy rating on Chevron stock, boosting their valuations to a high of $195. This gives investors the chance to add up to 24.6% upside to their portfolio should they choose to buy.
A Chance to 100% Upside in Transocean Stock
Knowing that the United States and China, together making up over 65% of global oil demand, will see their manufacturing and trade activities spike in 2025, investors can easily land on a bullish thesis for Transocean stock.
As a deepwater drilling services and equipment provider who benefits from oil demand before anyone else, this $3.5 billion company has accumulated a backlog of up to $9.3 billion in new orders from customers looking to get ahead of the production demand curve once oil rallies.
This would place the company’s valuation at a massive discount today, so analysts see the stock’s 56% of 52-week highs as an easy boost. With a price target of $8 a share in the upper range, closer to the demand realities Transocean is already facing, investors are exposed to a net upside of 106% from where the stock sits today.