The key to investing is to locate the right stock at the right price. There’s no point in putting ones’ hard earned money on a stock for which all the positives have already been factored into the share price. Nevertheless, a number of investors continue to do invest just this way, assuming stocks will surge indefinitely.
At the same time, investors tend to get rid of scrips whose prices declined — sometimes without even going into the reason behind the sell-off. It has been observed that often stocks are unfairly punished because of macro-economic factors that may not have any significant bearing on their company businesses.
In fact, contrary to the assessment of the general investor, pricing weaknesses often present the greatest investment opportunity.
Energy Investing: Moving Past Concerns
As far as the energy market is concerned, the above-mentioned factors make more sense.
Despite the pathbreaking OPEC agreement and the recent surge in oil prices to $54-a-barrel, several issues continue to weigh on the market – doubts over whether the producers will adhere to the output cuts, mounting worries about China’s crude demand, a stronger dollar, the likelihood of even greater shale production and rise in the number of rigs in operation.
Clearly, energy investors have ample reasons to worry about. However, most of these issues have been existent for quite some time now and have already influenced the market. A further fall in stock price just because of these factors may not be justified. Nonetheless, some oil stocks continue to do so. So, why not invest in these companies now that they have become cheaper?
But obviously, one must first come to the conclusion that the stocks are indeed on sale and that the decline in price is not the true reflection of its fundamentals.
There are several such stocks in the market; one just needs to answer the correct knock on the door.
Using the Zacks Methodology
With the help of the Zacks Stock Screener, we have zeroed in on five energy stocks that have witnessed a slump this past week but have a favorable Zacks Rank #1 (Strong Buy) or 2 (Buy). The solid Zacks Rank distinguishes good stocks from non-performers based on their strong fundamentals. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Moreover, other encouraging metrics indicate that they hold excellent prospects and this price slump may just be a temporary blip on the radar. These stocks are due for a turnaround, and are worth adding to your portfolio now…
Matador Resources Co (MTDR) is an independent exploration and production company with oil and gas holdings in the Delaware Basin of New Mexico, the Texas southern Permian and Eagle Ford shale, and Louisiana’s Haynesville and Cotton Valley plays.
The Zacks Rank #2 stock has surpassed estimates in each of the trailing four quarters with an average positive surprise of 250.51%. Further, this Dallas, TX headquartered company’s expected EPS growth rate for 3 to 5 years currently stands at 30% –– comparing favorably with the industry growth rate of 18.50%.
Bellatrix Exploration Ltd (BXE) operates as an oil and gas finder in Western Canada’s Sedimentary Basin. The firm surpassed estimates in three of the trailing four quarters with an average positive surprise of 15.21%.
The Zacks Rank #1 stock is also expected to deliver 53.6% year-over-year earnings growth this year, compared with an industry average of an increase of 40.6%.
Headquartered in San Antonio, TX, Pioneer Energy Services Corp (PES) provides contract land drilling services to oil and gas operators in the U.S. and Colombia. Though Pioneer Energy Services’ financials had to bear the brunt of weak crude prices like other energy sector firms, we appreciate its healthy drilling margin and improving activity levels.
The Zacks Rank #2 stock has seen its stock price fall over 11% in the past week. However, the company has delivered strong results in the past. Moreover, the ongoing oil price rally translates into a better market for oilfield service providers like Pioneer.
Sanchez Energy Corp (SN) is a Houston, TX-based independent exploration and production company with a primary focus on the Eagle Ford Shale in South Texas.
The Zacks Rank #2 stock has seen a decline in stock price of nearly 8% in the past week. Nonetheless, factors like an increasing 2017 production forecast, continued improvements in well costs and a low price-to-sales (P/S) ratio raise optimism. Sanchez Energy is also expected to deliver year-over-year earnings growth of 71.6% in 2016.
Jones Energy Inc (JONE) is an independent oil and gas explorer with operations focused in the Anadarko and Arkoma Basins of Oklahoma and the Texas Panhandle.
This Zacks Rank #2 stock has plunged almost 7% in the past week. However, it must be noticed that the company registered strong production volumes in the last quarter, while keeping operating and drilling costs in control. Jones Energy is also set to benefit from its low risk producing assets, improved balance sheet and lower financing costs.
The greatest opportunities could be found by buying fundamentally sound stocks when everyone is selling them.
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