The E&P sector and oil service providers have been hit hard in the last two months as falling oil prices, continued low natural gas futures and worries about worldwide economic growth have slammed the shares. I believe a lot of these shares have overcorrected and will reward patient investors. Here are two selections with low valuations and recent insider buying.
Four reasons W&T Offshore (WTI) has long term value at just under $16 a share:
- The median analysts' price target of the 10 analysts that cover the stock is $23.50 or 50% above the current stock price.
- 6 different insiders snapped up approximately $1mm in new shares in May.
- The company more than tripled operating cash flow from FY2009 to FY2011, and sells for less than 3 times operating cash flow.
- The stock is selling near the bottom of its five year valuation range based on P/E, P/S, P/B and P/CF.
Four reasons Hess Corporation (HES) is in deep bargain territory at $46 a share:
- Several insiders bought a total of over $3mm of new shares in May.
- Hess has a median analysts' price target of $70 a share, roughly 50% above the current stock price.
- The company is extremely cheap at just 90% of book value and just over 6 times forward earnings.
- The stock is selling at very bottom of its five year valuation range based on P/E, P/S, P/B and P/CF.
Disclosure: I am long HES.