Energy Companies With The Best Upside

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 |  Includes: APA, APC, BHI, BP, BPL, BTUUQ, CEO, CHK, CNQ, CNX, COG, COP, CVE, CVX, DO, DVN, E, EC, ECA, EOG, EQT, ESV, HAL, HES, HFC, IMO, MMP, MRO, MUR, NBL, NE, NOV, OXY, PAA, PTR, PXD, QEP, SDRL, SLB, SNP, STO, SU, TLM, TOT, VLO, XEC, YPF
by: Insider Monkey

The best-performing stocks in the market are usually the highest growing stocks or those with the highest expected growth rates. This doesn’t mean that one should be invested in growth stocks and stay away from the value stocks at all times. Historically value stocks managed to beat the growth stocks hand over fist. The reason is simple. Value stocks are beaten down stocks with very low or negative growth expectations. Not surprisingly, it is easier for these stocks to beat the expectations on the average. On the other hand, everybody is extremely bullish about growth stocks and expect them to have higher growth rates in the future. Their stock prices also reflect this fact. Not surprisingly, it is more difficult for these stocks to beat these challenging expectations.

We ranked energy companies based on their expected five-year growth rates, with data from Yahoo Finance. Contrarian investors should look into the stocks that top the table.

Company name

Symbol

Forward P/E

Expected 5-Year Growth Rate

ConocoPhillips

(NYSE:COP)

7.11

(0.18)

TOTAL S.A. (ADR)

(NYSE:TOT)

5.55

2.82

BP plc (ADR)

(NYSE:BP)

5.17

3.47

Plains All American Pipeline

(NYSE:PAA)

15.34

3.75

Chevron Corporation

(NYSE:CVX)

6.81

4.23

Noble Corporation

(NYSE:NE)

7.95

4.34

Magellan Midstream Partners

(NYSE:MMP)

16.8

5.08

Marathon Oil Corporation

(NYSE:MRO)

5.63

5.57

CNOOC Limited

(NYSE:CEO)

5.49

5.97

Pioneer Natural Resources

(NYSE:PXD)

14.11

6.22

China Petroleum & Chem

(NYSE:SNP)

5.38

6.26

Eni S.p.A.

(NYSE:E)

5.98

6.50

PetroChina Company Limited

(NYSE:PTR)

7.63

6.58

Cimarex Energy Co.

(NYSE:XEC)

8.25

6.88

EnCana Corporation

(NYSE:ECA)

24.74

6.99

Statoil ASA

(NYSE:STO)

6.96

7.03

EOG Resources, Inc.

(NYSE:EOG)

15

7.28

Murphy Oil Corporation

(NYSE:MUR)

6.09

7.43

Anadarko Petroleum

(NYSE:APC)

17.29

7.68

Talisman Energy Inc.

(NYSE:TLM)

8.22

7.83

Buckeye Partners, L.P.

(NYSE:BPL)

17.42

7.85

Valero Energy Corporation

(NYSE:VLO)

4.51

7.91

Noble Energy, Inc.

(NYSE:NBL)

10.16

7.94

Apache Corporation

(NYSE:APA)

6.95

8.27

Canadian Natural Res

(NYSE:CNQ)

8.56

8.48

Devon Energy

(NYSE:DVN)

7.69

8.84

SeaDrill Limited

(NYSE:SDRL)

9.12

9.21

Occidental Petroleum

(NYSE:OXY)

7.85

9.46

Hess Corp.

(NYSE:HES)

6.82

9.74

Chesapeake Energy

(NYSE:CHK)

9.62

10.02

ENSCO PLC

(NYSE:ESV)

7.28

10.25

National-Oilwell Varco

(NYSE:NOV)

9.61

10.45

Schlumberger

(NYSE:SLB)

11.43

10.89

Nexen Inc.

(NXY)

6.08

11.05

Suncor Energy Inc.

(NYSE:SU)

7.31

12.18

YPF SA

(NYSE:YPF)

7.9

12.34

Diamond Offshore Drilling,

(NYSE:DO)

11.53

13.25

QEP Resources, Inc.

(NYSE:QEP)

13.47

14.48

Cenovus Energy

(NYSE:CVE)

12.93

15.21

Halliburton Company

(NYSE:HAL)

7.37

15.68

Cabot Oil & Gas

(NYSE:COG)

23.84

16.33

CONSOL Energy Inc.

(NYSE:CNX)

8.5

16.35

Imperial Oil Limited

(NYSEMKT:IMO)

10.14

16.62

Ecopetrol S.A. (ADR)

(NYSE:EC)

9.98

16.63

EQT Corporation

(NYSE:EQT)

19.68

16.68

Baker Hughes

(NYSE:BHI)

8.56

19.02

Peabody Energy

(BTU)

6.53

19.79

HollyFrontier

(NYSE:HFC)

5.16

28.7

Click to enlarge

ars. As a result its P/E ratio is extremely low. Warren Buffett has about 2.8 Billion in COP. Ken Griffin largely increased his holding of COP by 18-fold during the second quarter.

There are other oil companies trading at lower prices because of low expected growth rates: Total and BP. One of the stocks hedge funds are extremely bullish about is TOT. John Overdeck and David Siegel, Paul Tudor Jones, Michael Novogratz and Jim Simons increased their holdings in TOT shares during the second quarter. T. Boone Pickens also has SLB in his portfolio. Ken Griffin also initiated a brand new $5 million TOT position.

Another stock that hedge funds heavily invested during the past few months is BP. Seth Klarman initiated a brand new $243 million BP position during the second quarter. Steven Cohen also agreed and had a new 4 million BP position. T. Boone Pickens, John Griffin, Passport Capital's John Burbank, star hedge fund manager David Einhorn, and Whitney Tilson are among the hedge fund managers who are extremely bullish about BP.

CVX is also a promising stock. Jim Cramer recently bought CVX for his charitable trust’s portfolio. He preferred CVX over COP because of its higher growth rate. Phill Gross and Robert Atchinson had $311 million in CVX shares. Jim Simons also initiated $77.8 million CVX position.

Usually stocks with higher expected growth rates trade at much higher multiples. Some of the stocks with higher expected growth rates in our list have very attractive multiples. BTU, HFC, HAL, SU, NXY, HES, and OXY deserve a closer look. Insiders are getting bullish about some of these stocks as well. There was a $10 million insider purchase in HES last week.

We like energy stocks and believe that they are indeed trading at attractive multiples. However, if global economy significantly slows down or slips into recession these stocks will definitely get cheaper and that will be a better time to buy these stocks.

Disclosure: I am long CHK, COP.