I think the oil and gas subset of the energy sector shows long-term promise given increasing demand in the developing world, new technologies and the move away from coal and nuclear fuel sources in much of the developed world. I have a significant part of my portfolio in the integrated oil and gas players that pay good dividends like Conoco Phillips (COP). I am starting to look more at small capitalization equities, especially those that are rapidly growing earnings and revenue. Here are two I like that are selling at less than $7 a share.
Gran Tierra Energy (GTE) - "Gran Tierra Energy Inc., an independent energy company, engages in the acquisition, exploration, development, and production of oil and gas properties in Colombia, Argentina, Peru, and Brazil". (Business Description from Yahoo Finance)
4 reasons GTE is cheap at under $6 a share:
- GTE is showing sharply increasing earnings. It made $.14 in FY2010, is expected to book $.45 in FY2011 and analysts have it pegged for 62 cents in EPS in FY2012.
- Consensus earnings estimates for FY2011 and FY2012 have risen significantly over the last three months.
- The company has a solid balance sheet with over $225mm in net cash ($.82 per share)
- GTE grew revenue north of 50% in FY2011 and analysts project over 20% sales growth in FY2012. The consensus price target on GTE by the 16 analysts that cover the stock is $9.
Parker Drilling (PKD) - "Parker Drilling Company, together with its subsidiaries, provides contract drilling and drilling-related services in the United States, Latin America, Africa and the Middle East (AME), the Asia Pacific, and Commonwealth of Independent States". (Business Description from Yahoo Finance)
4 reasons PKD is a buy at under $7 a share:
- Parker Drilling is rapidly increasing earnings. It earned $.08 in FY2010, is projected to make $.53 in FY2011 and analysts expect 72 cents in EPS in FY2012.
- Analysts expect revenue growth to accelerate at an 18% pace in FY2012 and the stock is trading at just over 9 times forward earnings.
- Despite the stock's recent rise, insiders are holding tight. There has been no insider selling over the last six months.
- The stock is priced at a very reasonable under 8 times operating cash flow and just 21% over book value.