Crude oil is now trading at it's lowest level since mid February. I'm expecting the commodity along with others to trade down throughout the week as the market tries to place a value on the US credit downgrade. Even though oil may drop, will it remain at these low prices? I do not believe that anyone would suggest that crude oil will remain near $80 throughout the remainder of the year. This commodity is perhaps sure to rise in an economy full of questions.
The last time crude oil was in this price range was February 15, when oil was $84.32. From that point crude oil saw massive gains until reaching $105.44 on March 7. During this time, companies that were part of the energy sector experienced the same large gains as the commodity, with some stocks more than doubling.
With an assurance that crude oil will rise is it time to purchase companies that are directly related to the price of crude oil? I most definitely believe so and below is a list of companies, both large and small cap, that experienced massive gains during February to March, when crude oil saw its largest gains. These companies have since traded lower but are sure to increase with the price of oil. In a rough economy full of uncertainty the following energy stocks may be your best bet to capitalize on large immediate returns.
Royale Energy (ROYL) is a small-cap stock with a cap of only $31.43 million that saw incredible gains during this time period. On February 22, the stock was trading at $2.10 and on March 2, the stock reached $7.90 a new 52-week high. The stock is currently trading near $3 a share. ROYL is a company that trades with a positive EPS of 0.08 and recently announced earnings that showed a net income of $259,347 compared with $76,853 year over year. The company shows promise and may prove to be a good investment long term with a small position.
Lucas Energy (LEI) is a small company with a market cap of $38.72 million. The stock trades with a price of $2.30. On March 1, the stock was trading at $2.09 and on March 7, the stock traded at 52-week highs of $5.23. The company recently released operating and quarterly results in which the company posted a high net loss despite having increased sales in crude oil and natural gas. The company's inability to produce a profit despite sales demonstrate operational issues. I would not buy this stock outside of a short opportunity to see gains on increased crude oil prices.
Samson Oil & Gas Limited (SSN) is a small cap stock with a market cap of $194.19 million. The stock currently trades with a price of $2.25 after losing more than 20% of its value after the drop in the crude price. The company saw a significant increase from December to March of 2011. The stock had risen from $1.10 on December 27, to $2.58 on February 16. The stock had seen gains after operations began to improve, however the stock remained near $2.60 for nearly one month. On February 16, the oil uptrend sent the stock to $4.75, a new 52-week high. This stock is a profitable company trading with EPS of 0.55 and a P/E of only 4.13. The low P/E is a result of the market sell-off but this company has improved its operations during the last year. With a low P/E and a great chance of seeing large gains in the future this stock could prove to be a solid investment with potential to grow.
Triangle Petroleum Corporation (TPLM) is a small-cap stock with a market value of $261.95 million. The stock trades at $6.10 after seeing a sell-off, which caused TPLM to lose more than 18% of its value in 5 days. On February 22, the stock was priced at $7.31 and on March 4, the stock reached a 52-week high of $9.73. With the stock trading much lower than its original starting point on February 22, it presents the opportunity to see large gains. However I am not sold on this company because I feel the financials are in too bad of shape.
Chesapeake Energy Corporation (CHK) is a large company with a market cap of $19.97 billion. The stock is currently trading at a price of $30.68, a loss over 10% during the previous 5 days. On February 18, the stock was priced at $30.43 and on February 28, the stock had reached $35.98. What intrigues me most about this stock is the price similarities. The current price is very similar to the price of February 18th just before it posted it's gain. The price of oil is very similar showing how CHK moves with the price of oil. I consider this stock to be a safe bet that will provide large gains when the price of crude recovers.
Sandridge Energy (SD) is a mid size company with a market cap of $3.19 billion. The stock's current price is $7.79 after seeing a 20% drop throughout trading on Friday after it announced earnings. The company announced that revenue and net income doubled year over year, however the price still dropped. This was the result of both crude oil falling and investors who believe the company's spending is excessive. I believe this company presents the perfect opportunity to buy. On February 22, the stock was priced at $8.61. The stock then reached a 52-week high of $13.34 on April 7, when crude oil was at 52-week highs over $112.00. The stock has demonstrated consistent movement with the price of crude oil and at these low prices the stock should see large movement when crude oil sees gains.
These companies collectively have little in common. The only similarity is that each experienced big gains in a short period of time after crude oil's strong price movement in February. With crude oil in a similar position and very few believing it will remain this low the companies are perfect buying opportunities. It is unknown if the jumps in price will compare with February and March but in this current economy you must take gains where you can get them regardless of the amount.
Disclosure: I have no positions in any stocks mentioned, but may initiate a short position in ROYL, SSN, CHK, SD over the next 72 hours.