10 Strong Energy Stocks With Significant Upside Potential

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 |  Includes: CHK, COP, DO, EOG, HAL, HK, HNR, SD, SLB, SU
by: David Alton Clark

Times of market turmoil often present the best buying opportunities for savvy investors. Contrarians find their best investment opportunities during times of panic. Cramer says, “No one ever made a dime panicking.” The bear market of 1974 gave Warren Buffett the opportunity to purchase a stake in the Washington Post Company (WPO). This one investment subsequently provided Buffett with more than a hundred-fold return. One of Buffett's famous quotes is "Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it."

Our innate instincts encourage us to depart a sinking ship. This survival tactic impacts the way we invest. When market panic creates opportunities to buy stock in solid companies with sound prospects, hopefully you have powder dry and take advantage. The market is clearly at an inflection point. To open a position you must have courage in your convictions; just remember, fortune favors the bold. A market correction provides opportunity to buy great names at a discount price.

The table below lists 10 energy stocks providing potential buying opportunities due to possibly oversold conditions and a discount to consensus estimates. I will stay keenly aware of any sentiment change regarding the energy sector. My instincts tell me that the pullback in oil and commodity prices will be a positive catalyst for the market going forward and drive additional sales of energy-related products due to increased economic activity.

Regarding the proposal to cut the oil and gas subsides, I do not believe this will pass muster. Even if it does go through, the subsequent increase in oil and gas prices will offset any losses the oil companies incur. Once everyone realizes demand destruction has been quelled, European debt issues are being solved, the street's profit-taking is over, and the global economic recovery continuing, I see energy stocks regaining past glory and reaching new highs.

By the way, do these events give you a sense of deja vu? They should; practically the exact scenario occurred 12 months prior.

Is the sentiment change regarding these stocks justified, or is this a case of the baby being thrown out with the bath water? Considering the broad-based sell-off, I submit it is the latter.

Here is the watch list image of 10 energy stocks possibly oversold and trading significantly below consensus estimates and 52-week highs:

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Please review the following details regarding the energy stocks on the above watch list. Consensus estimates were provided by Yahoo Finance. I believe these stocks were unjustly sold off and present excellent buying opportunities. I am considering starting a position in one or all of these stocks, depending on the market’s reaction to current news items.

Chesapeake Energy (NYSE:CHK) is the second-largest natural gas producer in the US. The company is trading significantly below analysts' estimates. CHK has a median price target of $39 by 25 brokers and a high target of $56. The last up/downgrade activity was on May 4, when Howard Weil upgraded the company from Market Perform to Market Outperform. Please review the illustration for CHK's summary and key statistics.

Conoco Phillips (NYSE:COP) is an international, integrated energy company. The company is trading significantly below analysts' estimates. COP has a median price target of $85 by 17 brokers and a high target of $94. The last up/downgrade activity was on Apr. 28, when Deutsche Bank downgraded the company from Buy to Hold. Please review the illustration for COP's summary and key statistics.

Diamond Offshore (NYSE:DO) is a leading global offshore oil and gas drilling contractor. The company is trading significantly below analysts' estimates. DO has a median price target of $75 by 29 brokers and a high target of $92. The last up/downgrade activity was on Apr. 29, when Canaccord Genuity initiated coverage on the company with a Hold rating. Please review the illustration for DO's summary and key statistics.

EOG Resources, Inc. (NYSE:EOG) explores for, develops, produces and markets natural gas and crude oil. The company is trading significantly below analysts' estimates. EOG has a median price target of $124 by 23 brokers and a high target of $144. The last up/downgrade activity was on Mar. 30, when Ticonderoga downgraded the company from Buy to Neutral. Please review the illustration for EOG's summary and key statistics.

Halliburton Co. (NYSE:HAL) provides a variety of services and products to customers in the energy industry related to the exploration, development, and production of oil and natural gas. The company is trading significantly below analysts' estimates. HAL has a median price target of $61 by 31 brokers and a high target of $81. The last up/downgrade activity was on Mar. 8, when Dahlman Rose initiated coverage on the company with a Buy rating. Please review the illustration for HAL's summary and key statistics.

Petrohawk Energy (NYSE:HK) is an independent oil and natural gas company engaged in the exploration, development and production of predominately natural gas properties located onshore in the United States. The company is trading significantly below analysts' estimates. HK has a median price target of $31 by 24 brokers and a high target of $39. The last up/downgrade activity was on Apr. 7, when MKM Partners downgraded the company from Buy to Neutral. Please review the illustration for HK's summary and key statistics.


Harvest Natural Resources Inc. (NYSE:HNR) is an independent energy company that engages in the acquisition, exploration, development, production, and disposition of oil and natural gas properties. The company is trading significantly below analysts' estimates. HNR has a median price target of $22 by three brokers and a high target of $25. The last up/downgrade activity was on Nov. 17, 2008, when SMH Capital initiated coverage on the company with an Accumulate rating. Please review the illustration for HNR's summary and key statistics.

SandRidge Energy Inc. (NYSE:SD) is an independent natural gas and oil company concentrating on exploration, development and production of oil and natural gas. The company is trading significantly below analysts' estimates. SD has a median price target of $14 by 21 brokers and a high target of $18. The last up/downgrade activity was on Apr. 28, when Global Hunter Securities upgraded the company from Reduce to Neutral. Please review the illustration for SD's summary and key statistics.

Schlumberger (NYSE:SLB) is the world’s leading supplier of technology, integrated project management and information solutions to the international oil and gas exploration and production industry. The company is trading significantly below analysts' estimates. SLB has a median price target of $105 by 32 brokers and a high target of $160. The last up/downgrade activity was on Mar. 8, when Dahlman Rose initiated coverage on the company with a Buy rating. Please review the illustration for SLB's summary and key statistics.

Suncor Energy Inc. (NYSE:SU) is an integrated energy company. The company is trading significantly below analysts' estimates. SU has a median price target of $45.50 by six brokers and a high target of $54.39. The last up/downgrade activity was on May 28, when Barclays Capital downgraded the company from Overweight to Equal Weight. Please review the illustration for SU's summary and key statistics.

Information was gathered from CNBC, Yahoo Finance and respective company websites. Based on the current market conditions I would suggest scaling in to any position to reduce risk. I believe all these stocks are currently undervalued and provide significant opportunities for long term investors. Please use this information as a starting point for your own due diligence.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in CHK, COP, DO, EOG, HAL, HK, HNR, SD, SLB, SU over the next 72 hours.