Energy stocks have underperformed this year, but Merrill Lynch analysts are reasonably positive on the sector for 2014, pointing to some key themes:
With the price of gas likely to remain in a narrow range next year, the firm says investors should buy high-quality, large resource-based stocks such as COG and RRC.
The net asset value race is over, and the coming year is about execution, ML says, seeing PXD and WLL as winners here.
Following 2013's wave of activism, the firm sees gains in HES and OXY.
Favorable outlooks for E&P budgets could lift oilfield services stocks focused on North America, such as HAL and SLB.
The ML team sees crude production rising to the highest level since 1989, and pinpoints TSO and VLO as the refiners to benefit the most in 2014 because they're crude-advantaged and have stock-specific catalysts.
Finally, the firm suggests investors with significant gains in CVX may want to take those and buy XOM for 2014.