The week of November 4 was rough for the stock market in general, but oil took it on the chin even harder. NYMEX crude was at $48.50 on Monday, but it fell to under $44.00 per barrel before closing at $44.07 on Friday. After weeks of being close to $50 per barrel, the price of oil is now challenging three-month lows.
It turns out that the OPEC production cut is not as solid once you get the countries asking for (or taking) exceptions. And then on Friday, Platt’s reported what everyone should have assumed anyway: OPEC nations had not started cutting back on production, In fact, OPEC had a record output of 33.54 million barrels per day in October.
Despite all the woes in the market, valuations being high, the Federal Reserve wanting to raise interest rates and the election, the reality is that these have all added up to a mere minor road bump so far. Investors are still looking for bargain investments in an expensive stock market, and they have managed to find a way to buy every major sell-off for over five years now.
It is crucial that investors understand that many of these oil and gas stocks have recovered handily from their lows of late 2015 or early 2016. While some oil and gas companies remain under extreme duress, others have rallied as much as 100% to 200% off of their panic-induced bottoms.
24/7 Wall St. tracks many analyst upgrades and downgrades to find new ideas each day and week. Some of these analyst calls are about stocks to Buy for quick moves or for long-term gains. The week of November 4 brought several key analyst calls looking for handy upside in the oil and gas sector. Investors and traders alike just have to keep in mind that there is no such thing as a free lunch when it comes to investing.
Rig counts in general continue to rise in America, and the banks have by and large suggested in their earnings conference calls that their exposure to energy loan defaults has largely subsided. The credit ratings agencies have even suggested that the worst of the bankruptcies are likely over.
Again, there is no free lunch in investing. The oil patch is no exception. Keep in mind that many analysts on Wall Street have no better information than sophisticated investors or industry professionals. Sometimes analysts also just make the wrong assumptions, and other times outside forces beyond anyone’s control mess up an otherwise great thesis.
In an effort to avoid extra risk in a period of higher volatility, 24/7 Wall St. has focused on the large-cap and mid-cap names that were more well known by investors. Some of the moves in the small-cap and more speculative companies can look zany, even in periods of minor selling. Here are five very positive analyst calls in the oil and gas sector for the week ending November 4, 2016.
Chevron Corp. (NYSE: CVX) performed better than rival Exxon Mobil Corp. (NYSE: XOM) after earnings. Despite a down day on Friday, Chevron closed up 1% for the week. There were numerous analyst calls here, but key was that Chevron was raised to Buy from Neutral and added to the prized Conviction Buy list at Goldman Sachs early in the week (at Exxon’s expense).
Goldman Sachs sees Chevron now as more attractive than Exxon after earnings, and the firm assigned a $118 price target for the stock. Even with the drop in oil this last week, the pre-call price of $103.82 was lower than the $104.78 share price at Friday’s close. Jefferies also reiterated its Buy rating and raised its target to $120 from $116 on Chevron, and price target hikes were also seen this week from analysts at Scotia Howard Weil, Credit Suisse, JPMorgan and elsewhere.
Chevron has a 52-week trading range of $75.33 to $107.58, but its consensus analyst price target of $111.71 earlier in the week was up to $114.25 by Friday.