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Investing Topics: Hedges

Getting Ready for a Real Buying Opportunity

Over the past two years, oil and gas producers have accounted for the bulk of the energy sector’s bankruptcies, laid low by excessive leverage, the collapse in commodity prices and inferior assets. Exploration and production companies haven’t emerged from the woods yet—but they’re not all goners. In fact, the buying opportunity that investors have awaited appears to be around the corner.

In a scenario where oil prices remain lower for longer, investors should focus on upstream operators with strong balance sheets, low production costs, a history of solid execution and franchise assets that can deliver output growth in a challenging environment. Names that can expand their output and win market share should outperform, while their cash-strapped peers or those with inferior assets will struggle.

The universe of exploration and production companies that meet our criteria is relatively small; don’t misconstrue this call as open season to buy upstream names indiscriminately. Not every oil and gas producer has the potential to outperform, let alone survive.

In this issue, we highlight a handful of our favorite names to scoop up during the coming buying opportunity. To help with timing, we’ve included dream buy prices for these stocks that reflect trough valuations in previous downturns and our outlook for commodity prices.

Buying the Selloff: Upbeat on Downstream Operators

Shares of US refiners have languished in recent months, but out outlook for regional crude-oil prices suggests that our two favorites should be in the money once again in 2015. Meanwhile, our favorite airline stock provides a hedge against lower crude-oil prices and has sold off precipitously amid fears that an ebola pandemic will curtail travel. Buy now.

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  • Live Chat with

    Elliott and Roger on Feb. 28, 2017

  • Portfolios & Ratings

    • Model Portfolios

      Balanced portfolios of energy stocks for aggressive and conservative investors.

    • Coverage Universe

      Our take on more than 50 energy-related equities, from upstream to downstream and everything in between.

    • MLP Ratings

      Our assessment of every energy-related master limited partnership.

    • International Coverage Universe

      Roger Conrad’s coverage of more than 70 dividend-paying energy names.

    Experts

    • Roger S. Conrad

      Founder and Chief Analyst: Capitalist Times and Energy & Income Advisor

    • Elliott H. Gue

      Founder and Chief Analyst: Capitalist Times and Energy & Income Advisor

    • Peter Staas

      Managing Editor: Capitalist Times and Energy & Income Advisor