After a long hard look, and some serious thought on where prices are heading. Merrill Lynch has upgraded the energy sector to Overweight, and the timing looks solid. It is one thing to try to catch the proverbial falling knife. It is quite another to have the patience and make sure a real turn is underway, something the Merrill Lynch team did.

While acknowledging that downside risk to oil prices kept them on the sidelines, Savita Subramanian, the outstanding Merrill Lynch equity strategist, and her team kept a close eye on commodity pricing and movement, and they are now convinced the bottom is behind us. They also note current very low sentiment and valuations in the sector that are at 30-year lows.

Lastly, they remain biased for what they call the “big, old and ugly” energy stocks, which are mega-cap leaders. These make good sense for investors, as they have shown long-term staying power and most pay outstanding dividends. We scanned the Merrill Lynch research data base for the top stocks in that category to buy.

ConocoPhillips

This company may offer investors some of the best total return possibilities. ConocoPhillips (NYSE: COP) is a large integrated name that draws a solid look at Merrill Lynch. The company has spent the past five years divesting assets, and although it is cash rich, it has somewhat dampened earnings and growth expectations all year long. At this juncture, with oil looking like it has found a bottom, and the market watching Saudi Arabia’s recent change of leadership, many analysts may feel more comfortable with the stock. The company’s big production ability in the Eagle Ford could bode well for the future.

The Merrill Lynch analysts feel that can Conoco can accelerate growth from reloaded portfolio depth in the Bakken and Eagle Ford, with visibility on future growth from a newly disclosed sizable position in the Permian.

ConocoPhillips investors are paid a very strong 4.44% dividend. The Merrill Lynch price target on the stock is $85. The Thomson/First Call consensus price target is $75.04. The stock closed Thursday at $65.58 per share.

ALSO READ: 4 Stocks to Own in Case the Stock Market Crashes
Exxon Mobil

This leading energy company crushed the earnings ball out of the park when it reported first-quarter results. Exxon Mobil Corp. (NYSE: XOM) is an energy sector behemoth on which many Wall Street analysts are very positive. Wall Street as a whole acknowledges the strength of the integrated giant plays a significant part in the company’s very solid first-quarter earnings report. The company’s global downstream chemical segment plays a huge part in driving earnings for Exxon.

The Merrill Lynch team points to the fact that the company’s major projects remain on track despite commodity pricing dips. Many on Wall Street expect efforts at the projects ramp up in the second half of 2015.

Exxon investors are paid a very respectable 3.4% dividend. The Merrill Lynch target price for the energy giant is $103. The consensus price objective is lower at $93.61. Shares closed trading on Thursday at $87.21. We also recently renamed this to the list of 10 Stocks That Could Be Owned For The Next Decade.

Hess

This company has been the subject of takeover speculation in the past and some of that chatter has reemerged recently. Hess Corp. (NYSE: HES) does not really qualify as a mega-cap, with a market capitalization just over $20 billion, but the company could fall prey to a larger integrated as a quick bolt-on acquisition to boost growth.

Hess is undergoing somewhat of a transition from an integrated oil and gas company to a predominantly exploration and production entity. The company is shifting its growth approach from high-impact exploration to a smaller, more focused exploration portfolio. Hess closed its Port Reading refinery, marking its complete exit from the refining business, and the Indonesian and Thailand assets were also sold. The company also has sold the retail-gasoline-distribution businesses, as well as other “lower margin” energy-producing assets around the world.

ALSO READ: 5 Big Oil Stocks to Buy for the Rest of 2015

The Merrill Lynch team points out that the 30% ownership the company has in Exxon’s big operating discovery in Guyana could be sizable, as Wall Street estimates have pegged the discovery at a whopping 300 million barrels, and the potential could be higher.

Hess shareholders are paid a 1.45% dividend. Merrill Lynch price target is at $100, and the consensus target is $82.10. Shares closed down Thursday at $69.94.

Occidental Petroleum

This stock is another top energy company that comes in as a high-yielding domestic stock in the sector, and it also resides on the Merrill Lynch US 1 list. Occidental Petroleum Corp. (NYSE: OXY) announced last year it will continue to grow dividends and expects to begin buying back more shares this year and beyond, a double plus for shareholders. Analysts feel that the company still faces the rebounding oil price correction with the strongest balance sheet in the sector, with net cash at year-end 2014 they estimate at around $1.7 billion, and a whopping $11 per share of cash available for buy backs. With chemicals and other products helping to blunt the drop in oil, Occidental is well positioned to ride out the storm.

Short sellers that had been leaning into the stock during the oil price decline have started to get out as prices have poked back through $60 a barrel.

This is another company that many on Wall Street see taking advantage of huge cost savings. In fact, capital expenditures are expected to fall from $1.7 billion to $1.0 billion by the end of the year.

Occidental shareholders are paid an outstanding 3.9% dividend. The Merrill Lynch price target is a massive $101, and the consensus target is at $85.57. Shares closed trading most recently at $76.95.

ALSO READ: Deutsche Bank Initiates Coverage on MLPs: 4 to Buy Now

The fact that Merrill Lynch waited to upgrade the sector shows they were smart and did not want to bite on a head fake. All the stocks to buy offer growth and income investors solid long-term holdings.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.