Beyond Buffett's Picks: Why These Energy Giants Could Outperform Chevron and Occidental in 2025
86min read Warren Buffett’s Berkshire Hathaway has long been a stalwart investor in energy giants like chevron (CVX) and Occidental Petroleum (OXY), amassing stakes worth billions. Yet, as the energy landscape shifts toward renewables, cost efficiency, and shareholder returns, investors might wonder: Are there better alternatives? Morningstar’s latest analysis highlights a slate of undervalued energy stocks poised to outpace traditional oil majors. Here’s why investors might want to look beyond Buffett’s holdings—and toward names like HF Sinclair (DINO), Devon Energy (DVN), and Schlumberger (SLB).
Why Consider Alternatives to Chevron and Occidental?
Chevron and Occidental face headwinds: Chevron’s integrated business model struggles with declining refining margins, while Occidental’s heavy debt load and carbon capture risks weigh on its stock. Meanwhile, the alternatives recommended by Morningstar boast superior valuations, higher dividend yields, and strategic moves aligned with the energy transition.
Top Alternatives to Chevron and Occidental
1. HF Sinclair (DINO): The Undervalued Refining Play with Renewable Muscle
- Valuation: Trading at 46% below its $58 fair value ($26.48 vs. $58), DINO is the cheapest stock on Morningstar’s list.
- Key Strengths:
- Expanded refining capacity to 678,000 barrels per day (mb/d) after acquiring Sinclair Oil, gaining a strategic West Coast footprint for renewable diesel production (380 million gallons annually).
- Diversified into midstream assets (pipelines, terminals) and lubricants/chemicals, generating $450 million+ EBITDA annually.
- Forward dividend yield of 6.44%, the highest among listed stocks.
- Why It’s a Buy: The Sinclair acquisition creates synergies in marketing and midstream assets, boosting EBITDA by $70–$80 million annually. Its renewable diesel growth and high yield make it a compelling pick.
2. Devon Energy (DVN): The Low-Cost Shale Specialist
- Valuation: 33% undervalued at $34.72 vs. a $52 fair value.
- Key Strengths:
- Focus on low-cost U.S. shale plays, particularly the Delaware Basin, which accounts for two-thirds of production.
- Operational improvements (longer laterals, reduced well costs) enable modest production growth while prioritizing shareholder returns (60% of free cash flow distributed).
- 2.76% dividend yield, with room to grow as oil prices stabilize.
- Why It’s a Buy: Devon’s disciplined capital allocation and dominance in the Delaware Basin position it to thrive in an era of oil price uncertainty.
3. Schlumberger (SLB): The Global Oilfield Services Leader
- Valuation: 26% undervalued at $39.48 vs. a $54 fair value.
- Key Strengths:
- 75% of revenue from international markets (e.g., Middle East, Latin America), insulating it from U.S. shale volatility.
- Dominance in offshore drilling and completions, plus $4 billion in digital revenue targets by 2030 (data analytics, AI).
- 2.85% dividend yield, backed by synergies from its $400 million annual savings from the ChampionX acquisition.
- Why It’s a Buy: SLB’s global reach and innovation in digital solutions give it a narrow economic moat, making it a top pick for long-term growth.
4. Equinor (EQNR): The Renewable Transition Champion
- Valuation: 21% undervalued at $24.00 vs. a $30.50 fair value.
- Key Strengths:
- 5.82% dividend yield, among the highest on the list.
- Aggressive push into offshore wind (targeting 12–16 GW by 2030) and carbon capture projects like the Northern Lights facility.
- Oil/gas projects break even below $35/barrel, ensuring profitability even in downturns.
- Why It’s a Buy: Equinor’s balanced approach to renewables and traditional energy makes it a sustainable long-term play.
Honorable Mentions
- Enterprise Products Partners (EPD): A master limited partnership (MLP) with a 6.9% distribution yield and accretive acquisitions like Pinon Midstream.
- Exxon Mobil (XOM): A supermajor with a 3.4% dividend yield, LNG growth, and low-carbon investments.
Risks and Considerations
- Valuation Volatility: Energy stocks remain tied to oil prices. A sharp decline could pressure companies like Devon and Exxon.
- Regulatory and Geopolitical Risks: Occidental’s carbon capture projects and Chevron’s international operations face regulatory hurdles.
- Transition Risks: Firms like Equinor and HF Sinclair must execute on renewables to justify their premiums.
Conclusion: The Case for These Energy Giants
The table below summarizes why these alternatives outpace Chevron and Occidental:
| Metric | HF Sinclair (DINO) | Devon Energy (DVN) | Schlumberger (SLB) | Chevron (CVX) | Occidental (OXY) |
|---|---|---|---|---|---|
| Price/Fair Value Ratio | 0.54 (46% undervalued) | 0.67 (33% undervalued) | 0.74 (26% undervalued) | 0.80 (20% undervalued) | 0.73 (27% undervalued) |
| Dividend Yield | 6.44% | 2.76% | 2.85% | 4.9% | 2.08% |
| Growth Catalyst | Renewable diesel + midstream | Low-cost shale | Global digital services | Integrated model | Debt-heavy carbon capture |
Investors seeking higher yields, better valuations, and strategic alignment with the energy transition should prioritize HF Sinclair, Devon Energy, and Schlumberger over Chevron and Occidental. While Buffett’s picks remain solid, these alternatives offer a more compelling risk-reward profile in 2025—and beyond.
