It took some time, but the sanctions on Iran and the ongoing issues in Venezuela finally have started to push the benchmark pricing on oil higher. With West Texas Intermediate now closing in on $72 and Brent trading over $80, you can bet that producers, especially in the United States, are ratcheting up their output.
While there are still some transport issues from the Permian Basin, the bottom line is that the top stocks have not gone up in tandem with oil pricing, and some are offering outstanding entry points. We screened the Merrill Lynch energy research universe and found five top stocks that look like stellar additions to growth portfolios.
This top company’s stock is still down a stunning 30% from highs printed in 2014, the last time oil traded at $70. Anadarko Petroleum Corp. (NYSE: APC) operates through three segments. The Oil and Gas Exploration and Production segment explores for and produces natural gas, oil, condensate and natural gas liquids. The other segments are Midstream and Marketing.
The company has reported impressive results this year, and Merrill Lynch said this in a recent research note:
Anadarko has the capacity to sustain buybacks at current levels, providing support to close a value gap we see at 50% Strong free cash flow, enabled by advantaged Brent leverage has a competitive free cash versus traditional large cap ‘yield’ names. …but with competitive growth. The company has made transition towards compelling value, with growth and yield.
Shareholders receive a 1.48% dividend. Merrill Lynch recently raised its price target to a whopping $100 from $95. The Wall Street consensus price objective is $85.63, and shares traded Wednesday morning at $66.70.
This remains a top energy pick and is on the US 1 list at Merrill Lynch. Exxon Mobil Corp. (NYSE: XOM) is the world’s largest international integrated oil and gas company. It explores for and produces crude oil and natural gas in the United States, Canada, South America, Europe, Africa and elsewhere.
The company also manufactures and markets commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics, and specialty products, and it transports and sells crude oil, natural gas and petroleum products.
Exxon reported quarterly profits that fell short of analysts’ expectations, marking the fourth time in the past five periods the company has disappointed. The miss was largely due to weaker earnings in Exxon’s refining and marketing segment due to heavier-than-anticipated maintenance and operational problems. Exxon’s business producing oil and gas bolstered earnings, with the company saying it is favoring oil output over gas drilling in its U.S. shale fields.
Investors receive a 3.97% dividend. The Merrill Lynch price objective is $110, while the consensus target is $88.88. The shares traded at $86.15 early Wednesday.
This company is poised to be the largest refiner and is a more conservative way to play energy. Marathon Petroleum Corp. (NYSE: MPC) is currently one of the largest independent petroleum refining and marketing companies in the United States. Based in Findlay, Ohio, it and owns seven refineries in the United States with total throughput capacity of around 1.7 million barrels per day.
The company operates approximately 2,750 retail sites under the Marathon and Speedway brands. In addition, MPC operates a logistics network of pipelines, barges, trucks and terminals that store and transport crude and products.