If there was ever a tug-of-war in the markets, it is in the energy sector. Some see the “lower for longer” as the new paradigm, while others feel that the oversupply story is exaggerated. In a new research report, a Stifel analyst makes it very clear that the time to buy large-cap quality stocks is now, and not to wait for oil to put in an ultimate firm bottom.

Stifel lowers the oil and natural gas price levels for the rest of this year and next, and concedes that we will be oversupplied for at least another year. The analyst also thinks that large-cap companies with strong assets and solid balance sheets can break away from oil prices again before crude reaches a bottom for a second time during this cycle.

We picked four of the stocks that are rated Buy at Stifel. It is important to mention that in this report Stifel also lowers price targets as well.

EOG Resources

This is a leading energy company that shows up well on the Jefferies screens. EOG Resources Inc. (NYSE: EOG) is the top producer in the Eagle Ford Shale, and it has solid positions in both the Bakken and Permian Basins, making it a perfect fit for an integrated looking to expand in those areas, should a purchase or merger make sense. EOG has come up in takeover chatter this year.

This is also a stock that hedge fund guru Kyle Bass owns. He is known for having an extremely keen eye when it comes to balance sheets, so it is no surprise that this company resides in the Hayman Capital portfolio.

ALSO READ: 4 Natural Gas Exploration and Production Stocks With Massive Upside Potential

As of the end of last year, EOG Resources reported total estimated net proved reserves of 2,497 million barrels of oil equivalent, including 1,140 million barrels (MMBbl) crude oil and condensate reserves, 467 MMBbl natural gas liquid reserves and 5,343 billion cubic feet of natural gas reserves.

EOG investors are paid a small 0.90% dividend. The Stifel price target for the stock is $90, and the Thomson/First Call consensus price target is $95.34. Shares closed on Thursday at $75.79.
Concho Resources

This is one of the top energy plays in the Permian Basin in West Texas. 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. The company also is whispered to be a possible takeover candidate.

While second-quarter revenue numbers were less than Wall Street expected, on a per-share basis, the company had a loss of $1.02. Earnings, adjusted for non-recurring costs, came to $0.38 per share. That result topped Wall Street expectations.

The Stifel price target is $126, and the consensus target is $137.55. Shares closed Thursday up big at $102.99, a gain of almost 8%.

Cimarex Energy

This is another top play for investors looking to the Permian Basin. Cimarex Energy Co. (NYSE: XEC) is an independent exploration and production company, with primary activities in the mid-continent and Permian Basin areas of the United States. Cimarex is focused on increasing shareholder value through strategies linked to generating attractive economic returns on capital employed and profitable growth in per-share reserves, production and cash flow. It intends to profitably grow reserves and production through a balanced mix of exploration, exploitation and acquisitions.

ALSO READ: Deutsche Bank Says Stick With Top Stocks Growing Dividends

Cimarex has a diversified base of high-quality production and attractive drilling opportunities, and it should be closing on a huge oil and gas asset sale by the end of the summer. It should be noted that hedge fund gurus Steve Cohen and George Soros initiated sizable new positions in the company recently.

Investors are paid a small 0.6% dividend. The Stifel price target is $130, but the consensus target is $131.70. Shares closed Thursday at $105.13.

Pioneer Natural Resources

Many Wall Street analysts love this stock as a pure crude oil play. Pioneer Natural Resources Co. (NYSE: PXD) was the ultimate shale-oil growth story for the past five years, and it has been eviscerated in the sell-off that started almost a year ago. The stock declined almost 10% in the past two weeks and could be offering aggressive investors a potential entry point that could be very timely.

Pioneer is a huge player in the Permian Basin and the Eagle Ford in Texas, and the company owns more than 20,000 locations in the world’s second largest oil reservoir in the Midland Basin. In addition, the company owns its own frac fleets, allowing Pioneer to be a low-cost, high-margin producer, which could prove to be huge if prices trend sideways at current levels for a protracted period.

Some analyst think that the company could add rigs to the tune of up to two per month the rest of this year, and as many as eight rigs in the first quarter of next year.

Pioneer investors are paid a tiny 0.07% dividend. Though the Stifel price target is $140, and the consensus figure is a whopping $170.69. Pioneer closed trading on Thursday at $115.38.

ALSO READ: Merrill Lynch Says Move From Momentum to Yield and Growth Stocks

Stifel figures that the prices will not move in lock-step as oil finally finds the ultimate bottom, and energy investors have learned over the years to take advantage of price breaks in the sector leaders. The Stifel top stocks to buy make good sense in aggressive growth portfolios.

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