The 3 Hottest Stocks Surging on Oil’s Rebound

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Oil is on the rise once again, and since February’s 13-year lows, oil prices have surged 70%. That’s been great news for anyone owning shares of California Resources Corp (CRC), Denbury Resources Inc. (DNR), or Energy Transfer Equity LP (ETE), which have each essentially doubled … in the last month alone.

The 3 Hottest Stocks Surging on Oil's Rebound (CRC, DNR, ETE)Declining U.S. oil production, potentially higher demand from emerging markets and a dovish Federal Reserve have all played roles in the rebound, and energy stocks are rebounding with it. It looks like this rally has some real legs to it.

The gains of CRC, DNR, and ETE, however, have far outpaced the percentage gains in crude oil prices. Oil prices are up about 15% in the last month to upwards of $45.50 a barrel, while these three stocks have returned more than five times that in the same period.

Let’s take a look at these exemplary performers — the three hottest mainstream stocks in the market over the past month — and see what makes these names so special.

Stocks Surging on Oil’s Rebound: California Resources Corp (CRC)

Stocks Surging on Oil's Rebound: California Resources Corp (CRC)1-month Returns: +101%

The stock market and commodity prices have been closely correlated recently, so it comes as no surprise that both oil prices and the S&P 500 began rebounding in February. This coincided nicely with rumors that OPEC and Russia were working together to reduce production — news that CRC stock owners ran all the way to the bank with.

Shares of the $850 million company bottomed in February as CRC stock hit lows of 28 cents per share. With 52-week highs near $10 per share, the California oil and gas producer had quite a bit of room to run. Add in the fact that CRC was a favorite play of short-sellers, and the stock’s epic rally has been largely the result of shorts rushing to cover their quickly souring bets.

Buyers beware, though: At last check, CRC had just $12 million in cash on hand — and over $6 billion in long-term debt.

Stocks Surging on Oil’s Rebound: Denbury Resources Inc. (DNR)

Stocks Surging on Oil's Rebound: Denbury Resources Inc. (DNR)1-month Returns: +85%

Shares of Denbury Resources, the Texas-based oil and natural gas producer, are also highly sensitive to oil prices. The sustained energy bear market of 2014 and 2015 illustrated that pretty clearly, with revenue falling 3.1% and then a whopping 48.6% in those respective years.

DNR stock hit a 10-year low of 89 cents per share earlier this year as oil prices bottomed, but have run all the way up to the mid-$4 range on 2016’s rebound.

Just because DNR is up so much in so little time, however, doesn’t mean there isn’t more room to run if oil continues to rally: Shares are still off 55.5% in the last year.

Like CRC, Denbury is highly leveraged, although DNR’s debt seems far more serviceable. At last check, the company had $145 million in cash on hand and long-term debt of $3.28 billion — still not as liquid as you’d like.

Stocks Surging on Oil’s Rebound: Energy Transfer Equity LP (ETE)

Stocks Surging on Oil's Rebound: Energy Transfer Equity LP (ETE)1-month Returns: +77%

Last but not least (unless you measure by one-month performance), we have Energy Transfer Equity. This is actually a somewhat curious inclusion in the list, since ETE is a collection of pipelines and not a producer.

Hypothetically speaking, fluctuations in oil prices shouldn’t matter much to ETE, since it merely collects a toll based on the volume it transports, but shares still got hammered as energy prices fell.

One major reason ETE stock was down to start the year was a planned merger with Williams Companies Inc (WMB), which shareholders were not fond of. Now that that deal could be dead in the water, sentiment is back on ETE’s side — and it doesn’t hurt that this coincides with a rebound in oil.

As recently as April 1, ETE was down nearly 50% on the year. Today, when you factor in the dividend, shares are trading sideways in 2016. ETE is actually InvestorPlace Contributor Charles Sizemore’s pick in the Best Stocks for 2016 contest, so it’ll be interesting to see how his pick plays out over the next eight months.

As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.


Article printed from InvestorPlace Media, https://investorplace.com/2016/04/crc-dnr-ete-oil-stocks/.

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