We have seen a lot of volatility in the oil markets in recent weeks, and that’ll probably continue for a while. There still is unrest in Egypt, which is not only an important oil and gas producer in its own right, but also controls the Suez Canal. While Syria is not major oil producer, anything that upsets the political balance or heightens violence in the Middle East is probably going to push oil prices higher.
Investors might be thinking about making a bet on oil and gas prices through energy stocks, but that’s a dangerous approach.
The key to making money in energy stocks is exactly the same as it is for every other industry. You need to ignore the noise of news and other outside influences and concentrate on buying the very best stocks and avoiding those with poor fundamentals. Oil markets are subject to an enormous amount of short-term economic and geopolitical influences but the long-term picture is one of ever-increasing demand and usage. As the global economy picks up, so will demand, and prices should remain relatively high for some time to come.
Finding the energy stocks with the best fundamentals can help you make money — even as the oil markets fluctuates wildly.
Cabot Oil & Gas (COG) is such a stock. Cabot is an oil and gas exploration and production company primarily focused on Pennsylvania’s Marcellus Shale, South Texas’ Eagle Ford and Oklahoma’s Marmaton oil play. The company has been experiencing strong earnings growth, with earnings up more than 100% in the most recent quarter. The results have caught analysts a little flat-footed, and COG has posted four consecutive positive earnings surprises. The strong fundamentals have been reflected in Portfolio Grader, which upgraded COG to an “A” back in February, making it a “strong buy” recommendation.
EQT Corp. (EQT) is more of an integrated energy company. It operates in three segments: production, midstream and distribution. The EQT Production segment engages in the exploration, development and production of natural gas, natural gas liquids and crude oil in the Appalachian Basin. The midstream segment provides natural gas gathering, processing, transmission and storage services to the independent third parties in the Appalachian Basin. The Distribution segment distributes and sells natural gas to customers in Pennsylvania, West Virginia and eastern Kentucky. In spite of the headwinds of a weak economy and low natural gas prices, the company has seen strong earnings growth and was upgraded to an “A” rating this week by Portfolio Grader. The stock is a “strong buy” at current prices.
Oil markets might have strong outside influences, but the key to making money in energy stocks is to buy those with great fundamentals and avoid those where conditions are not so great right now. Portfolio Grader can help you accomplish this goal.
Louis Navellier is the editor of Blue Chip Growth.