While most of Wall Street focuses on large and mega cap stocks, as they provide a degree of safety and liquidity, many investors are limited in the number of shares they can buy. Often the biggest public companies, especially the technology giants, trade in the low-to-mid hundreds, all the way up to over $1,000 per share. At those steep prices, it’s pretty hard to get any decent share count leverage.
Many investors, especially more aggressive traders, look at lower-priced stocks as a way to not only make some good money but to get a higher share count. That can really help the decision-making process, especially when you are on to a winner, as you can always sell half and keep half.
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Every week, we screen our 24/7 Wall St. research database looking for stocks with Buy equivalent ratings at major firms and priced under the $10 level (last week’s picks included Clear Channel Outdoor and Glu Mobile), and this week was no exception. We focused on the underperforming energy sector and found five new stocks that could provide investors with some solid upside potential. While more suited for aggressive accounts, they could prove exciting additions to portfolios looking for solid alpha potential.
Callon Petroleum
This is a small-cap stock that Northland Securities favors. Callon Petroleum Co. (NYSE: CPE) is an independent oil and natural gas company that is engaged in the exploration, development, acquisition and production of oil and natural gas properties. The company focuses on the acquisition and development of unconventional oil and natural gas reserves in the Permian Basin.
Callon’s drilling activity focuses on the horizontal development of various prospective intervals in the Midland Basin, including multiple levels of the Wolfcamp formation and the Lower Spraberry shale. The company made a huge $570 million acquisition of 29,000 net acres last May, which more than doubled its Delaware Basin footprint.
Merrill Lynch has a price target on the shares is $9, and the Wall Street consensus target is $8.68. The stock traded on Friday’s close at $3.93 a share.
Chesapeake Energy
This company has been in and out of the news often frequently the past 20 years, and its stock offers brave investors an incredible entry point. Chesapeake Energy Corp. (NYSE: CHK) is one of the largest U.S. companies engaging in the acquisition, exploration and development of properties for the production of oil, natural gas and natural gas liquids from underground reservoirs.
The company holds interests in natural gas resource plays, including the Marcellus in Northern Appalachian Basin in Pennsylvania; Haynesville in northwestern Louisiana; Eagle Ford in south Texas; Brazos Valley in southeast Texas; Powder River Basin in Wyoming; and Mid-Continent in the Anadarko Basin of northwestern Oklahoma. As of December 31, 2018, it owned interests in approximately 13,200 oil and natural gas wells, and it had estimated proved reserves of 1,448 million barrels of oil equivalent.
Morgan Stanley has a $2.50 price target, which is well above the $1.95 consensus target. Shares closed on Friday at $1.36 apiece.
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