When markets sell off risky assets, the first out of the chute are the high-beta momentum stocks. The important tact for long-term investors is continue to look at areas already hard hit, and scale in cash slowly to see just how big a sell-off could be in the cards.
One area that has had a rough go for almost a year is the energy sector, both in exploration and production and in oilfield services. In a new research note, RBC sees the second half of the year ramping up with top companies increasing drilling activities. With U.S. land service activity near what the RBC team sees as a bottom, now is the time for opportunistic long-term investors to think about buying.
RBC listed top stocks that were increasing rig counts or had raised capital to fund increased drilling and completion activity. These could be stocks that could have a head-start on any significant sector rally.
This stock has been the center of takeover chatter for years, and it could be an outstanding stock for aggressive accounts to consider now. Apache Corp. (NYSE: APA) an independent energy company that explores, develops and produces crude oil, natural gas and natural gas liquids. It operates onshore and offshore assets primarily in the Permian Basin, the Anadarko basin in western Oklahoma, the Texas Panhandle, Gulf Coast areas of the United States, as well as in Western Canada. The company also operates assets in Egypt, Australia and offshore the United Kingdom in the North Sea. As of December 31, 2014, it had total estimated proved reserves of 1,074 million barrels of crude oil, 282 million barrels of natural gas liquids and 6.2 trillion cubic feet of natural gas.
The RBC team says the company should be adding an additional five rigs this year. Some analysts feel that since the company has seen a very positive streak of beating earnings estimates, especially over the past two quarters, it could come in with another strong beat this quarter. Apache topped estimates by at least 40% on both occasions.
Apache investors are paid a 1.75% dividend. The Thomson/First Call consensus price target for the stock is $70.72. Shares were trading at $57.63 on Tuesday’s close.