- 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.