The stock market has been in a steady and slow non-stop uptrend since December 20th. The market began a small pullback at the start of March. Since then, the Nasdaq, SP 500, and Russell 2000 have rallied back to their recent highs. Unfortunately, volume has been lower, the advance/decline line has lagged, and stocks hitting new 52-week highs is lower compared to the previous high.
This suggests that this rally is being led by less stocks. This is typical of market action right before a pullback. If the market decides to pull back here, finds a bottom, and can begin to rally again, there are going to be a lot of high quality new issues to purchase from the Oil&Gas sector.
In the Oil & Gas sector, the bottom line is all about supply and demand. The growth in Asia and the rest of the world, along with the U.S. government destroying the value of the dollar via printing, ensures that the price of this precious commodity will only rise in the near and long term future.
This bad news for the public is great news for investors. History clearly tells us that the best stocks in the stock market for the past 130 years show massive EPS and sales growth before the start of their biggest uptrends.
Let's take a look at four recent new issues that are producing massive profits and huge revenue growth.
Laredo Petroleum (LPI) is a Tulsa, OK company that engages in the exploration and development of oil and natural gas in the Permian and Mid-Continent regions of the United States.
Laredo Petroleum's EPS has grown 139%, 139%, 136%, 175%, 29%, 29%, and 254% the past seven quarters. Sales growth has been 30%, 100%, 100%, 148%, 251%, 146%, 146%, and 120% the past eight quarter.
Laredo Petroleum's debt to shareholder equity is 120%, cash flow is $1.46 a share, and return on equity is 25%. The P/E ratio is currently at 21 in the mid range of its short historical range of 16-26.
This growth has resulted in 79 mutual funds taking ownership of the company as of the latest quarterly report. Mutual funds own 27% of the current float. Management only owns 3% of the shares outstanding which is unfortunately low for a newly listed company. It is always better to see management ownership higher as it indicates a large vested interest in maintaining the current growth to increase profits.
Sanchez Energy Corporation (SN) is a Houston, TX company that engages in the exploration and development of oil and gas in Gonzalez, Zavala, Frio, Fayette, and other counties in Texas.
Sanchez Energy Corporation's EPS growth has grown 150%, 150%, 150%, and 400% the past four quarters. The recent EPS growth has been fueled by sales growth. Sales growth the past seven quarters has been 183%, 183%, 999%, 999%, 999%, 999%, and 138%. Full year 2012 annual EPS estimates are expected to rise 375% to $0.57 per share.
Sanchez Energy Corporation has a debt to shareholder equity of 0% and a cash flow of -$0.04. Return on equity is currently not available from my data provider MarketSmith. Sanchez Energy Corporation currently sports a high P/E ratio of 206 which is in the upper end of its short historical range of 154-236. The high P/E ratio may scare off value investors but savvy investors know that the P/E ratio is useless when it comes to finding the best stocks that produce huge gains.
As of the most recent quarterly report there are 43 mutual funds that are invested in this stock which makes up 37% of the current float. More importantly, management owns 67% of the shares outstanding. This kind of ownership is what you want to see in a possible big winning stock. This shows that they have a vested interest in making sure the company continues to grow and stay profitable.
Inergy Midstream LP (NRGM) is a Kansas City, MO company that owns, operates, develops, and acquires Midstream energy assets in the northeast region of the United States.
Inergy Midstream LP EPS has grown 0%, 0%, 56%, 33%, 56%, 56%, 0%, and 58% the past eight quarters. During this time sales growth has gained 5%, 5%, 17%, 12%, 23%, 23%, 11%, and 30%. These gains are expected to continue in the future with 2012 and 2013 annual EPS estimates for gains of 24% and 60% respectively.
Inergry Midstream LP has a debt to shareholder equity of 0%, a cash flow of $1.03, a return on equity of 8%, an EPS growth rate of 21%, and offers a 0.8% dividend yield. The P/E ratio is currently in the upper range of its short historical range of 27-37, with a current P/E ratio of 34.
There are 19 mutual funds that are invested in Inergry Midstream LP as of the most recent reported quarter. These funds own 21% of the float. Unfortunately, management does not have any ownership of the shares outstanding.
Last but definitely not least, we come to the best of the 4 companies I cover here. C&J Energy Services (CJES) is a Houston, TX provider of hydraulic fracturing and coiled tubing services with focus on complex well completion in Texas, Louisiana, and Oklahoma.
C&J Energy Services EPS growth has exploded 600%, 500%, 999%, 999%, 999%, 999%, 207%, and 203% the past eight quarters. These huge gains in earnings are being produced by huge sales growth. Sales growth has risen 95%, 149%, 401%, 412%, 290%, 336%, 173%, and 156% the past eight quarters. The huge growth is expected to continue with 2012 and 2013 annual EPS estimates for gains of 32% and 6% to $4.32 and $4.59 respectively.
C&J Energy Services has a shareholder to equity debt is 11%, a very large cash flow of $3.67, an incredible return on equity of 66%, and carries a very low P/E ratio of 6. The P/E ratio is in the low end of its historical range of 4-13.
Mutual fund ownership has grown from 159 to 223 funds the past two quarters. These mutual funds now own 51% of the float. Wisely, management is vested in the company, owning 17% of the shares outstanding.
All of the companies above have the growth it takes to make a great stock. My personal trading is more short-term and I want to see strong price action before going long any of these securities.
I want to see all of these stocks break out of sound consolidation patterns that all are currently creating. A breakout to new 2012 highs would be my signal to take these securities long.
If you have a longer term time frame, as long as the growth continues, you have the fundamentals necessary to latch on to a possible big stock market winner in one of these names.