5 Top-Ranked Energy Bargains Under $20 - Analyst Blog

For starters, one can buy a lot many shares of a company for a certain amount. While expenditures seem to increase exponentially, the same is usually not true for our income. From the little that we actually manage to set aside for investment, one would definitely prefer to buy 100 shares, say at around $20, rather than buying 10 shares at $200. Often these $20 firms hold tremendous potential but remain off investors’ radar.

Also, the percentage gain on such stocks is much higher. A $1 upward price movement on a $20 dollar stock would result in a 5% gain. However, on stocks of $100 or above, it would result in a gain of only 1% or less.

However, most of these players are generally not industry giants and hence, a little extra effort must be put in to select the correct stocks. This is where the Zacks Rank, which justifies a company’s strong fundamentals, can come in really handy.

Why the Energy Sector?

Investors are probably well aware of the investing mantra "make the buying decision during a downturn." If you have been waiting for good news, you probably have lost an opportunity.

If you have been following the energy sector for a year, clearly you would understand the word "downturn" fits perfectly. With crude prices falling below $50 a barrel from the peaks of over $100 seen in June last year, the profit margins of several players from the industry have seen massive declines. This has hit stock prices as well.

Nevertheless, this has made many stocks not only cheap but also really good bargains. Although the overall bearish sentiment on the oil and gas industry has taken all stocks down with it, yet some of these remain fundamentally strong.

Our Picks

With the help of our new style score system, we have picked five outstanding stocks that have excellent prospects and might offer solid investment returns. Our research shows that stocks with Value Style Scores of ‘A’ or ‘B’ when combined with Zacks Rank #1 (Strong Buy) or 2 (Buy) offer the great investment opportunities.

Also, these stocks are currently trading below $20, which makes them lucrative picks.

WPX Energy, Inc. WPX

Based in Tusla, OK, WPX is an exploration and production company. The company has been streamlining its operations over the last 12 months, which includes acquisition and divestiture deals exceeding $1.5 billion in transaction amount. The company has plans to make capital investments of nearly $725 million in 2015 in its core assets. These measures should drive bottom-line growth at WPX.

WPX currently trades at $12.89 per share, substantially below its 52-week high of $26.79. But that could change considering the company’s strong fundamentals, which are indicated by a Zacks Rank #1 and a Value Score of ‘A.’ Also, the firm has seen a large number of upward revisions for its current year earnings estimates, suggesting further bullishness ahead.

Statoil ASA STO

Statoil is a Norway-based major international integrated oil and gas company. The company is gaining momentum with the start-up of operations on several new oil and gas fields. Statoil is also planning turnarounds on several oil and gas fields in 2015 to improve recovery of resources in mature fields.

Statoil currently trades at $18.58 per share, substantially below its 52-week high of $31.95. The firm, however, holds great potential for gains. This energy sector giant – with market capitalization of over $59 billion – currently holds a Zacks Rank #2 and a Value Score of ‘A.’ Also, the firm has seen an upward revision in earnings estimates for the current year, which raises optimism.

QEP Resources, Inc. QEP

Denver, CO-based QEP Resources is a leading independent energy company engaged in the exploration, development and production of natural gas, crude oil and natural gas liquids. With a diversified asset base, exposure to emerging plays and quality acreage in multiple basins, this mid-cap onshore-focused E&P offers compelling value.

The company is currently trading at $18.83 per share, substantially below its 52-week high of $35.91. But QEP’s strong fundamentals, indicated by a Zacks Rank #2 and a Value Score of ‘B,’ could change the current scenario. The firm has reported strong numbers on the earnings front and beat the Zacks Consensus Estimate in three of the trailing four quarters. Moreover, the company has been witnessing upward estimate revisions for the full year, which suggest further bullishness ahead.

Linn Energy, LLC LINE

Houston-based Linn Energy is an independent oil and natural gas exploration and production company. The company has a strong hedging position and continues to deliver production growth despite a decline in capital spending. The company also expects substantial improvement in full-year DCF coverage.

Linn Energy currently trades at $10.58, way below its 52-week high of $32.74. However, its Zacks Rank #2 and a Value Score of ‘A’ indicate strong fundamentals that are likely to drive the stock higher. On the earnings front, Linn energy has surpassed the Zacks Consensus Estimate in three of the trailing four quarters. Also, northward earnings estimate revisions indicate further bullishness ahead.

Ocean Rig UDW Inc. ORIG

Ocean Rig provides oilfield services for offshore oil and gas exploration, development and production drilling. The company has a robust fleet and strong backlog position that allows it to withstand the current weakness that has hit the offshore drilling industry. Moreover, the company continues to win contracts even in this challenging market. This is hopeful and should drive bottom-line growth for the firm.

Ocean Rig is currently trading at $7.75 per share, much lower than its 52-week high of $19.97. However, the company has a strong Zacks Rank #2 and Value Score of ‘A.’ It has exceeded the Zacks Consensus Estimate in three of the trailing four quarters. Also, the company has seen upward earnings estimate revisions for both the current quarter as well as the current year, an indication of strong performances ahead.

Bargains All About Valuations

Finding a bargain stock is all about strong fundamentals and making the most of an opportunity by taking the right decision at the right time. The best part of buying them: they come really cheap and hold tremendous potential.

The above-mentioned stocks are trading way off from their 52-week high levels as the weakness in the oil and gas sector has been factored into it. But with strong fundamentals, there is only one way to go from here – up!

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