I’m naming energy as the top sector for 2012. Supply disruptions, economic fears, consumer habits all had an impact on the sector in 2011 and will keep doing so in the year ahead. However, the sector is set for explosive growth in the New Year due to a dynamite combination of rising discretionary income and the highest level of consumer confidence in years. For that reason, I highly recommend that you pick up at least a few shares in our energy and energy-related companies.
Approach Resources (NASDAQ:AREX) is a drilling company in the hottest untapped oil and gas market. Energy trapped in sand and shale formations was once too difficult and expensive to extract, but not anymore. Thanks to Approach’s sophisticated technology, total production was up 46%, revenues were up 87% and net income rose 240% in the last quarter. The stock has been on a tremendous run in the last three months, rising 72%. As the company finds more oil and natural gas, I expect these gains to continue.
2012 Estimated Sales Growth: 39.1%
2012 Estimated Earnings Growth: 54.5%
Colfax (NYSE:CFX) is critical when it comes to transporting liquids — particularly for oil and gas companies. After all, what good is your oil if you can’t get it to the refinery? Colfax is the leading expert in pumping and fluid-handling systems, and it has been at the top for over 10 years. The most recent quarter brought a 71% increase in net income, a 28% rise in sales and a whopping 23% earnings surprise. Analysts are going to continue to underestimate this company in 2012, and that’s why you should own the company in the New Year.
2012 Estimated Sales Growth: 7.2%
2012 Estimated Earnings Growth: 19.9%
Complete Production Services (NYSE:CPX) is the perfect stock for a market defined by higher energy prices because it helps oil and gas companies develop reserves, enhance production and reduce costs — all while doing it faster than other companies. Every company is looking for an edge, and that’s why they’re seeking out CPX. Sales growth has been through the roof and will continue to grow in 2012.
2012 Estimated Sales Growth: 25.1 %
2012 Estimated Earnings Growth: 37.7%
Carbo Ceramics (NYSE:CRR) helps boost the output for natural gas and oil wells. It’s complicated, but CRR is a master of reducing spillage and keeping wells from being damaged in the extraction process. Looking ahead, the company expects demand for its product to continue to boom. Carbo Ceramics is so optimistic about future demand that it is commencing production on its newest 250 million-lb. production line at one of its plants in Georgia. And the company is buying back its stock — always a good sign and a boost to shareholder value.
2012 Estimated Sales Growth: 26.4%
2012 Estimated Earnings Growth: 28.9%
CVR Energy (NYSE:CVI) is a one-of-a-kind company. In addition to perfecting clean transportation fuel, the company takes the petroleum coke produced by its refinery and uses it to make its nitrogen fertilizer. CVR is the only producer in North America that uses this process, and it couldn’t be a better time to be involved in both businesses. Energy prices are obviously on a long-term uptrend, as is demand for food from a growing world population. People need energy and food — that’s why I highly recommend CVI for 2012.
2012 Estimated Sales Growth: 12.2%
2012 Estimated Earnings Growth: -10.7%
Delek US Holdings (NYSE:DK) is a recent addition to our Buy List. I included this particular refiner because not only does it refine 140,000 barrels of oil a day, it also operates approximately 400 fuel and convenience stores that can sell that fuel. They’re cutting out the middleman by being the middleman and boosting revenues. I love when a business can take control of costs like DK does. And business has been so good that management recently approved a special cash divided of 18 cents per share in December. I like the business, I like the dividend (current yield 1.3%) and I like the company’s prospects for 2012. Buy DK now.
2012 Estimated Sales Growth: -28.4%
2012 Estimated Earnings Growth: -40.7%
OYO Geospace (NASDAQ:OYOG) makes instruments and equipment used by seismic contractors and oil and gas companies to find oil. You can’t profit from the oil boom if you can’t find the oil, and OYOG is the go-to company. Recently, it announced a new $7.4 million order from an oil exploration company that is expected to deliver by Dec. 31. This means great things for the upcoming quarter, and I expect OYO will receive more high-profile and high-price-tag orders like this in the coming year.
2012 Estimated Sales Growth: 11.9%
2012 Estimated Earnings Growth: 14.5%
Patterson-UTI Energy (NASDAQ:PTEN) operates the second-largest land-based drilling fleet in North America. Its rigs and support vehicles allow the company to be everywhere at once and charge drillers for that equipment. During the last quarter, Patterson-UTI operated an average of 221 oil rigs at any given time — compared with an average of 202 oil rigs in the prior quarter. And business is booming. Third-quarter sales were up 78% and earnings were up 179%. Looking forward, the company is increasing its rig count by 20% a month, and that will keep earnings on the rise.
2012 Estimated Sales Growth: 23.2%
2012 Estimated Earnings Growth: 25.6%
RPC (NYSE:RES) provides oil industry consulting and technical services like snubbing, coiled tubing, nitrogen services and well control. In the third quarter, RPC had to contend with supply shortages for raw materials needed to drill shale formations and adverse weather conditions in the Northeast, which hindered transport. Nonetheless, booming demand for the company’s services and surging oil prices helped drive RPC ahead of most of the industry. Flush with cash, in the third quarter RPC invested over $100 million in new equipment and maintenance. This investment is going to help the company in the long run, and shares are trading at very attractive prices.
2012 Estimated Sales Growth: 23.6%
2012 Estimated Earnings Growth: 22.0%
Tesoro (NYSE:TSO) is an oil refiner that operates in six states and can pump out a maximum of 665,000 barrels per day. It’s this incredible capacity that has allowed the company to increase sales 52% and hike earnings 516%. The company is constantly finding ways to reduce costs and improve margins. And that focus is going to make Tesoro a tremendous buy throughout 2012.
2012 Estimated Sales Growth: -0.70%
2012 Estimated Earnings Growth: -26.0%