If any group of investors feels like they are tardy to the party, it’s those in the energy sector, and with good reason. While the price of West Texas Intermediate crude is up a stunning 46% from the lows posted in late December, stocks in the energy sector are lagging that huge move by a large margin. In fact, the Energy Select Sector SPDR (NYSEARCA: XLE) fund, which tracks the sector, is only up 16.5% since the lows, not even matching half the crude price move.

Given the huge disparity in the price levels, we screened the Merrill Lynch energy research database looking for stocks that had big upside potential to the firm’s posted target prices. We found five that look like outstanding plays going forward, and with the busy summer driving season right around the corner, now may be a great time to add shares.

Anadarko Petroleum

This top stock is still down a stunning 30% from highs printed in October, and it is also a solid liquefied natural gas (LNG) play. 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 (NGLs). The other segments are Midstream and Marketing.

Anadarko has the capacity to sustain planned stock buybacks at current levels, providing support to close a value gap that many on Wall Street see at 50%. Strong free cash flow, enabled by advantaged Brent leverage, has competitive free cash compared with traditional large-cap “yield” names, but with competitive growth potential. The company has made a transition toward compelling value with growth and yield.

Anadarko Petroleum shareholders are paid a 2.70% dividend. The Merrill Lynch price target for the stock is a stunning $80. The Wall Street consensus price objective is much lower at $66.89, and the shares closed trading on Wednesday at $44.47 apiece.

Concho Resources

Last year, this company bought RSP Permian for $9.5 billion, and most on Wall Street loved the deal. Concho Resources Inc. (NYSE: CXO) is an independent oil and natural gas company engaged in the acquisition, development and exploration of oil and natural gas properties.

It offers investors a unique combination of investment themes, including valuation, rate-of-change and resource expansion themes. The company is the largest acreage holder of the publicly traded Permian large-caps and provides investors peer-leading exposure to three of the most impactful catalysts across the Delaware Basin, including the Wolfcamp XY, Wolfcamp D and Bone Spring Shale.

Concho Resources has reported strong earnings but still has a lot of upside to the posted price targets.

The company pays a small 0.45% dividend. Merrill Lynch has a price target of $155, and the posted consensus target is $157.18. The stock closed most recently at $108.87 per share.

Exxon Mobil

This remains a top Wall Street energy pick, and it has bounced back nicely from the December lows. 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.

Exxon 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.

For 75 years in a row, Exxon Mobil has raised its dividend. Thanks to its vertically integrated model in the oil and gas business, its profitability doesn’t suffer through commodity price swings like a company that’s a pure play in one segment of the value chain.

Exxon shareholders are paid a nifty 4.05% dividend. The $105 Merrill Lynch price objective is well above the $83.99 consensus target price. The stock closed at $80.90 on Wednesday.

Hess

This top mid/large cap pick is down 20% from highs printed last October and is on the Merrill Lynch US 1 list. Hess Corp. (NYSE: HES) is an exploration and production company that develops, produces, purchases, transports and sells crude oil, NGLs and natural gas. It primarily operates in the United States, Denmark, Equatorial Guinea, the Joint Development Area of Malaysia/Thailand, Malaysia and Norway.

The Merrill analysts are extremely bullish on the shares as they see multiple catalysts for the company this year. A recent research piece noted this:

With an inflection in free cash flow in the Bakken from 2020 and first oil from Guyana, we expect a dividend raise next year, the first since 2013. Management suggests a long term dividend target of ~$450 million may be appropriate, leaving headroom for significant share buy backs. While the share price has led many sector peers in 2019, we believe investor patience is starting to pay off with substantial exploration option value remaining, perhaps best characterized by Hess CEO John Hess: “we know we’re sitting on a pot of gold.”

Shareholders of Hess are paid a 1.68% dividend. Merrill Lynch has set its price target at $82. The consensus target is $65.50, and the shares were last seen trading at $59.56 apiece.

Valero Energy

This is a Wall Street and a Merrill Lynch favorite that may be a solid play for more conservative balanced accounts. Valero Energy Corp. (NYSE: VLO) is the largest independent petroleum refining and marketing company in the United States. It is based out of San Antonio, Texas; owns 13 refineries in the United States, Canada and Europe; and has total throughput capacity of around 2.5 million barrels per day.

Valero also is a joint venture partner in Diamond Green Diesel, which operates a renewable diesel plant in Norco, Louisiana. Diamond Green Diesel is North America’s largest biomass-based diesel plant.

Valero sells its products in the wholesale rack or bulk markets in the United States, Canada, the United Kingdom, Ireland and Latin America. Approximately 7,400 outlets carry Valero’s brand names.

Valero Energy investors are paid an outstanding 4.27% dividend. The Merrill Lynch price target is a massive $126, while the posted consensus target is a much lower $106.82. The stock closed on Wednesday at $84.26 a share.

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These five outstanding stocks with big upside to the Merrill Lynch price targets all pay dividends. With the first-quarter earnings reporting season right around the corner, it makes sense to perhaps buy partial positions now and wait for the results, which given the oil price deck level during the quarter should be solid.

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