Zacks
0
All posts from Zacks
Zacks in Our Research. Your Success.,

The Best Oil Stocks to Play the Crude Rebound



Welcome to Episode #28 of the Zacks Market Edge Podcast.

Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.

In this episode, Tracey is joined by Sheraz Mian, Zacks Director of Research, who also worked as an oil analyst for seven years. That makes him the perfect guest to have on to discuss what’s really going on in the energy market.

Sheraz and Tracey first discussed the crude sell-off and the oil stocks back in December 2015 in Episode #8 of the podcast

It’s worth listening to that podcast first, as Sheraz provides a great outline about how the crude sell off would look in 2016. And he was right!

Back then, crude was trading around $40 a barrel and the US rig count had fallen to 744 rigs from its peak of 2031 rigs in 2008. The energy market was grim. There was talk of a massive numbers of bankruptcies and the cutting of dividends.

Sheraz predicted that oil prices could briefly decline in the $20s and $30s but he thought they wouldn’t stay there very long because “the best solution for bringing supply back into equilibrium with production is low oil prices.”

He also predicted that by the middle of next year (i.e. 2016), there would be sharply lower US inventory and it would be reasonable to expect oil to trade in the high $50s to mid $60s by the end of the year.

It turns out he is a bit of an “oil whisperer” as his predictions last year seem to be turning into reality. The number of US oil rigs continued to drop and now sits at just 440. While inventories remain elevated, with production still declining, it’s only a matter of time before inventories start to fall.

Does he still think that crude prices will finish the year in the $50s and $60s?

And if they do, how do investors take advantage?

The oil stocks have had big runs, but Sheraz still likes the E&Ps. In the December 2015 podcast he liked Pioneer Natural Resources (PXD) and still likes it.

If you’re looking for a less known name, another one of his E&P favorites is Diamondback Energy (FANG).  

There’s also the big cap option. Occidental Petroleum (OXY) is high on his list and it still pays a juicy dividend, yielding 4%.

For investors looking for diversity, there’s the option of the big integrateds like Exxon (XOM), Chevron (CVX) and British Petroleum (BP). Sheraz discusses which one is his favorite this year.

These stocks have had big runs off their lows. Is it too late to get in? And what about the service companies like Schlumberger (SLB) and Halliburton (HAL)?

Sheraz and Tracey tackle these oil patch questions and more on this week’s podcast. 


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
PIONEER NAT RES (PXD): Free Stock Analysis Report
 
OCCIDENTAL PET (OXY): Free Stock Analysis Report
 
DIAMONDBACK EGY (FANG): Free Stock Analysis Report
 
EXXON MOBIL CRP (XOM): Free Stock Analysis Report
 
CHEVRON CORP (CVX): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research