Just a few months ago, many investors were bidding up oil stocks and some were expecting the turmoil in Libya and other oil-rich countries to cause a huge price spike. Currently, oil is trading around $100 per barrel and a large number of oil stocks are trading at dirt-cheap valuations for any long term investor. Tensions have subsided in Libya but they are now rising in Iran and if worse case scenarios come to pass, then oil could easily surge over $125 per barrel.
Another big reason to focus on oil is due to the considerable amount of money printing that is likely to occur over the next few years. Loose money policies from debt ridden countries will probably lead to inflation in the future. Oil demand is only going to increase over time and recessions don't last forever.
This is an opportunity for longer-term investors to be accumulating, because it won't be long before we see another spike in oil prices. If you buy at or near the recent lows, you could end up just about doubling your money if these stocks hit the price targets set by analysts this year. Most analysts set price targets based on where they believe the stock should be trading at in the next 12 months or so. The companies below are in the oil industry and are poised for strong gains.
Berry Petroleum (BRY) is trading at $43.88. Berry is a oil and gas company with projects located in California, Texas, Utah, and Colorado. These shares have traded in a range between $30.59 to $61.77 in the last 52 weeks. The 50-day moving average is $39.97 and the 200-day moving average is $47.23.
BRY is estimated to earn $2.66 per share in 2011 and $4.18 in 2012. The book value is $20.58 per share. BRY pays a dividend of 32 cents which yields .9%. Global Hunter Securities recently downgraded BRY and lowered the price target to $45, however, RBC Capital Markets has a outperform rating with a $67 price target on BRY shares, see that here: http://finviz.com/quote.ashx?t=bry&ty=c&ta=1&p=d I would wait for pullbacks below $39 per share.
Key Energy Services (NYSE:KEG) is trading at $15.10. Key provides maintenance and other services to oil and gas companies. These shares have traded in a range between $8.27 to $20.77 in the last 52 weeks. The 50-day moving average is $12 and the 200-day moving average is $14.95. KEG is estimated to earn 98 cents per share in 2011 and $1.61 in 2012. The book value is $6.84 per share.
According to one analyst, KEG shares have a long-term price target of $25. This stock has spiked in recent days due to a favorable mention on Mad Money and because of the nearly 500 point market rally. I would wait for pullbacks before considering a buy. If you can buy KEG on another dip to about $12.50 and hold it to $25, that will yield 100% gains.
Basic Energy Services (NYSE:BAS) is trading at $18.84. Basic provides oil well cementing, pressure testing, maintenance and other services to oil and gas companies. These shares have traded in a range between $12.49 to $37.79 in the last 52 weeks. The 50-day moving average is $17.58 and the 200-day moving average is $23.63.
BAS is estimated to earn $1.93 per share in 2011 and $2.47 in 2012. The book value is $8.40 per share. In terms of PE ratios, this appears to be one of the cheaper oil industry stocks in the market. BMO Capital Markets has a outperform rating with a $39 price target.
Marathon Petroleum Corporation (NYSE:MPC) is trading at $33.39. Marathon is a leading refiner of oil. These shares have a 52 week range of $26.35 and $47.43. The 50-day moving average is $33.90, and the 200-day moving average is $37.38, so the stock is trading below recent support levels. Book value is stated at $28.15.
Marathon is estimated to earn $8.45 per share in 2011 and $6.03 in 2012. MPC pays a $1 per share dividend which yields 3%. This stock looks undervalued, especially on any dips. Global Hunter Securities has a buy rating with a $55 price target on MPC shares.
Magnum Hunter Resources (MHR) is trading at $4.81. This company controls about 46,000 acres in the Marcellus Shale region as well as exposure to the Eagle Ford and Bakken. These shares have traded in a range between $2.33 to $8.66 in the last 52 weeks. The 50-day moving average is $4.22 and the 200-day moving average is $5.98. MHR is estimated to post a slight loss in 2011 and earn 6 cents in 2012.
This stock is trading for nearly 50% off the 52-week highm and could be poised gains in 2012. However, it has rebounded sharply off recent lows, so wait for pullbacks before considering a buy. Global Hunter Securities has a buy rating with a $9 price target on MHR shares.
The data is sourced from Yahoo Finance and Stockcharts.com.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Disclaimer: The information and data is believed to be accurate, but no guarantees or representations are made. Rougemont is not a registered investment advisor and does not provide specific investment advice. The information contained herein is for informational purposes.