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. Many of the biggest public companies, especially the technology giants, trade in the hundreds, all the way up to over $1,000 per share or more. 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.
We screened the Goldman Sachs research database looking for energy stocks that are likely to survive the current troubles and could very well offer investors some huge returns over the next year or so. With oil still trading near the $40 a barrel level, and all these could be great ideas for aggressive accounts.
While all five stocks are rated Buy, it’s important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Magnolia Oil and Gas
This smaller cap company has been on a wild ride this year and its shares look poised to move higher. Magnolia Oil and Gas Corp. (NYSE: MGY) engages in the business of acquisition, development, exploration and production of oil, natural gas and natural gas liquids (NGLs) reserves in the United States.
The company has oil and natural gas properties located in Karnes County and the Giddings Field in South Texas, primarily comprising the Eagle Ford Shale and the Austin Chalk formation. As of December 31, 2019, its assets consisted of a total leasehold position of 455,964 net acres, including 16,841 net acres with 200 net producing wells in the Karnes County portion of the Eagle Ford Shale, and 439,123 net acres with 846 net producing wells in the Giddings Field of the Austin Chalk.
The Goldman Sachs price target is $7.75, close to the consensus estimate of $7.83. The shares were trading around $5.50 on Friday.
Noble Energy
Noble Energy Inc. (NYSE: NBL) is an independent energy company engaged in the acquisition, exploration and production of crude oil, natural gas and NGLs worldwide. Its principal projects are located in Denver-Julesburg Basin, Marcellus Shale, Eagle Ford Shale and Permian Basin of the United States, as well as in deepwater Gulf of Mexico, offshore Eastern Mediterranean and offshore West Africa.
The company has been in the process of a reset in operating cash flow toward gas in Israel, which trades at above two times U.S. gas prices and could substantially contribute to cash flow this year.
Goldman Sachs has a price target of $10.50 for the shares, which is less than the $11.71 Wall Street consensus target. Noble Energy stock slipped below $8.50 last week.
Parsley Energy
This is a smaller capitalization stock for aggressive investors to consider. Parsley Energy Inc. (NYSE: PE) is an oil and gas producer with 227,000 net acres in the Permian Basin. The majority of acreage sits on the Midland side of the basin, but the company also holds a small acreage position in the Delaware Basin. Through strategic acquisitions and acreage swaps, it has grown its acreage position since its initial public offering and has over 7,900 horizontal locations across multiple prospective zones
The company is catalyst rich and a Permian Basin pure play. Parsley Energy has some of the strongest wells in the basin, generating returns that are among the best in the industry. It is also rapidly de-risking its drilling inventory and is well positioned to continue to beat its strong growth projections.
The $11.50 Goldman Sachs price target is less than the $15.70 consensus target. Parsley Energy stock slipped below $9 a share late in the week.
Viper Energy Partners
This limited partnership also could be in the sights of a bigger player. Viper Energy Partners L.P. (NYSE: VNOM) owns, acquires and exploits oil and natural gas properties in North America. As of December 31, 2019, it had mineral interests in 24,304 net royalty acres in the Permian Basin and Eagle Ford Shale, with estimated proved oil and natural gas reserves of 88,946 thousand barrels of crude oil equivalent.
Viper Energy Partners GP operates as the general partner of the company. The company was founded in 2013 and is based in Midland, Texas. Viper Energy Partners operates as a subsidiary of Diamondback Energy.
The consensus for the third quarter has been increased by a penny to a $0.04 net loss per share, and the full-year estimate for next year has been raised by four cents to $0.15 per share.
Shareholders receive a 1.63% distribution. Goldman Sachs has set a $12 price target. The posted consensus target is $14.21, though, and the shares were changing hands south of $8 last week.
WPX Energy
This smaller capitalization energy company has solid upside potential and is yet another top Permian Basin play. WPX Energy Inc. (NYSE: WPX) is an independent oil and natural gas exploration and production company engaged in the exploitation and development of unconventional properties in the United States. Besides the Permian Basin, its principal areas of operation include the Williston Basin in North Dakota and the San Juan Basin in New Mexico and Colorado.
WPX is a premier Permian-levered operator with sector-leading debt-adjusted cash flow growth supported by strong execution in the core Delaware, all while trading at a Williston Basin valuations, primarily due to its relatively high financial leverage.
Second-quarter 2020 adjusted earnings before interest, taxes, depreciation and amortization of $400 million was ahead of expectations, while production above estimates and capital spending was lower. Completions are expected to continue in the second half. The analysts like the operational momentum (new completion design), opportunistic hedges and solid free-cash-flow outlook ($200 million in 2020).
The Goldman Sachs analysts have a $6.75 price target. The consensus price objective is $9.18, and WPX Energy stock has traded between $4 and $5 a share for the past two weeks.
These five companies have all been sent to the single-digit penalty box. While energy remains wildly out of favor, the Goldman Sachs team is positive on the sector for 2021 and feels that we will see an increase in benchmark pricing next year as the COVID-19 pandemic tapers off and the global and domestic economy improves.
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