2 Controversial Energy Concerns To Buy Now

| About: Anadarko Petroleum (APC)
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The market has had a huge run in 2013 and it is getting harder and harder to find relative bargains in equities after the ~25% rally in the overall market this year. However, I still like the energy sector as the huge energy boom in the United States has room to run.

Below are profiles of two fairly controversial energy concerns that I believe have attractive long term prospects.

The stock of Anadarko Petroleum (NYSE:APC) has taken a better than 15% hit in recent weeks mostly due to a result from an unexpected litigation decision. I believe the pull back in the shares is a good buying opportunity. The company is appealing the ruling and I think there is a good chance that settlement will be reduced at some point in the future.

With the pullback, the company has become a much cheaper proposition for a larger acquirer. Speculation is increasing that the stock's recent decline heightens the possibility that someone will step up and make Anadarko the largest acquisition in the energy sector in quite some time. Anadarko is the largest producer in the Eagle Ford and has prime overseas assets as well.

Before this award the median price target of the 32 analysts that covered the stock was $108 a share, more than 30% above the current price. Revenues are tracking to over 13% growth this fiscal year and Anadarko should post growth near 10% in FY2014. Earnings will post better than 20% gains in 2013 and analysts expect similar results in 2014. Given its growth, shares are relatively cheap at ~15x forward earnings. The stock also sells for less than 6x trailing operating cash flow as well.

Note: The author recently picked up some long dated just out of the money bull call spreads on the back of litigation triggered decline in Anadarko.

Cabot Oil & Gas (NYSE:COG) is one of largest natural gas producers in the country, which is currently out of favor with investors. It also has 60,000 net acres in the liquids rich Eagle Ford shale region of Texas where it is planning to boost its oil production substantially.

This E & P concern is one of the biggest gas producers in the economic Marcellus shale region of Pennsylvania. Jim Cramer calls Cabot his favorite Marcellus play. The company is experiencing rapidly growing production. Cabot just boosted guidance for the entire year to reflect 50% to 55% production growth year over year.The company's range of growth in 2014 is for another 30% to 50% production gain.

The stock is pricey at just under 30x forward earnings. However, in the just reported quarter Cabot boosted earnings more than 90% year over year and is tracking to more than double overall in 2013. Analysts expect ~75% earnings growth in FY2014 as well. Deutsche Bank and Topeka Capital have made positive comments on the company's prospects in December as well.

Disclosure: I am long APC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.