5 Energy Stocks To Buy With Incredible Momentum

The U.S. Energy Department's weekly inventory release showed that crude stockpiles recorded a huge drop.

As per the federal government’s EIA report, oil inventories decreased by a massive 14.51 million barrels for the week ending Sep 2, 2016, following a rise of 2.28 million barrels in the previous week.

The analysts surveyed by S&P Global Platts – the leading independent commodities and energy data provider – had expected crude stocks to go up some 425,000 barrels. A sharp decline in imports and improvement in refinery demand led to the big stockpile drawdown with the world's biggest oil consumer.

Following the bullish data, West Texas Intermediate (WTI) crude futures jumped 4.7% (or $2.12) to settle at a two-week high of $47.62 per barrel Thursday.

A One-Off Event?

However, the outsized one-week drop – largest in 17 years – is being referred to as an isolated event. It largely resulted from a tumble in net imports as Tropical Storm Hermine moved into the Gulf of Mexico and prevented tankers from docking. In fact, imports into the U.S. Gulf Coast fell to a record low of 2.48 million barrels per day on account of delayed offloading of cargoes.

Therefore, the market reaction might be temporary with oil supplies likely to register a big jump in this week’s report as those ships which were interrupted from unloading last week unload.

In summary, the oil market is set to continue its topsy-turvy ride.

Future Remains Uncertain

One thing the oil market downturn has taught investors: nobody has much visibility into the future. So, when you think of something as a clear line of sight one quarter, it can soon be overshadowed by an unforeseen event.

We all know that 2015 was brutal for the oil industry with U.S. crude futures ending last year 30% below the 2014 level, which itself was 46% below the 2013 level.

This year has been more of the same.

The uncertainty in the energy markets have continued in 2016 with a lot of volatility. Oil prices recovered from a 12-year low of $26.21 a barrel in February to $50/barrel mark in early June, slipped again to under $40 only to rally toward $50 once more.

As such, the future direction of the commodity’s movement is anybody's guess.

Momentum Investing to the Rescue

As evident from the energy market story, stocks can take a sudden turn for the good (or bad), making stock picking a risky game. Every good stock also has its bad day, which further adds to the risk. At the same time, this volatility can be exploited to make significant profits, which is where the Momentum Style Score enters the picture.

The Momentum Style Score is an indication of the time to buy a stock to benefit from rising share prices. The highest score is an A, so getting in on an A and out on a B or C could be a strategy for short term gains. For a more in-depth understanding, check out our Style Score System.

But investors should bear in mind that this is a speculative strategy and not meant for the weak-of-heart.

That said, we pair the Momentum Style Score of A with a Zacks Rank of #1 (Strong Buy) or #2 (Buy), which as you know indicates stocks with high chances of outperforming the market over the next 1-3 months. 

One of the main factors driving the Zacks Rank is estimate revisions, so stocks with high ranks as well as high momentum scores have even greater chances of short-term appreciation.

Here, we’ve picked out five energy stocks for momentum investors based primarily on these two factors:

5 Stocks to Invest In

Matador Resources Co. (MTDR - Snapshot Report) : Sporting a Zacks Rank #1, Matador Resources is an independent exploration and production company engaged in the acquisition, finding, and development of unconventional onshore oil and gas properties.

McDermott International Inc. (MDR - Analyst Report) : Incorporated in 1959, Houston, TX-based McDermott International is an engineering and construction company, solely focused on the offshore oil and gas business. McDermott International currently has a Zacks Rank #2.

Archrock Partners L.P. (APLP - Snapshot Report) : Houston, Texas-based Archrock Partners – holding Zacks Rank #2 – is a leading provider of natural gas contract compression services to clients spread all over U.S.

Subsea 7 S.A. (SUBCY - Snapshot Report) : London-based Subsea 7 is a leading oilfield contractor engaged in the designing, procurement, building, installation, and servicing of a range of offshore surface and sub-surface equipment for the oil and gas industry. Subsea 7 currently has a Zacks Rank #2.

Independence Contract Drilling Inc. (ICD - Snapshot Report) : Houston, TX-based Independence Contract Drilling – with a Zacks Rank #2 – offers land drilling services for oil and natural gas producers primarily in the U.S.

Bottom Line

If you are looking for fresh picks that have potential to move in the right direction, definitely keep the 5 abovementioned stocks on your list as these look well-positioned to soar in the near term.


How did you like this article? Let us know so we can better customize your reading experience.


Leave a comment to automatically be entered into our contest to win a free Echo Show.