All the Wall Street companies we follow here at 24/7 Wall St. keep a list for their institutional and retail clients of high-conviction stock picks. These are generally the companies they not only like on a longer-term basis, but those that usually have big upside to the assigned target price. Since the beginning of the second quarter, many Wall Street firms have tweaked their lists to account for potential changes in 2018, and one company has added an outstanding stock we feel could have outsized upside.

In a recent research note, Jefferies makes a big move by adding a large cap energy company to its well-respected Franchise Picks list of stocks.

Not only is Marathon Petroleum Corp. (NYSE: MPC) the newest member of the Franchise List, but it is a returning member. Also, the company has begun the long process of completing a massive purchase of another refining giant. Marathon agreed to buy rival Andeavor (NYSE: ANDV) for $23.3 billion in the biggest-ever deal for an oil refiner. That would create the largest independent fuel maker in the United States.

The offer, payable in either cash or shares, values Andeavor at about $152.27 a share, the companies said in a statement last week. That represents a 24% premium over the closing price the prior to the announcement. Jefferies loves the deal and noted this in its report:

Last week, we added Marathon Petroleum back to the Franchise Picks list. Pro-forma for the deal, analyst Corey Goldman estimates the company trades at about a 20% discount to peers. Following the deal, Marathon will be the largest operator of refining capacity in the US and he believes that management can achieve the $1 billion in synergies that they suggest. In addition, Corey gives the company no credit for the possible International Maritime Organization change, which implies additional potential upside.

Marathon shareholders are paid a 2.22% dividend. The Jefferies price target for the shares is $95, while the Wall Street consensus target is $86.56. The shares were last seen trading at $78.00.

Three other energy companies on the Franchise Picks list also make the grade.

Chevron

This integrated giant is a safer way for investors looking to stay or get long the energy sector, and it has a big Permian Basin exposure. Chevron Corp. (NYSE: CVX) is a U.S.-based integrated oil and gas company with worldwide operations in exploration and production, refining and marketing, transportation and petrochemicals.

The company’s production from the Permian Basin continues to exceed trajectory, and it provided investors with a reasonable bullish update at the March 6 investors day. With Permian production and asset disposals targets reset, the company can raise the dividend 20% and buyback 15% of shares. Many analysts view the strategy update as appropriately conservative for one of the more oil-levered majors. The Chevron strategy through 2020 is focused on discipline, enabled by step change in capital efficiency driven by doubling Permian production.

The company sports a sizable dividend and has a solid place in the sector when it comes to natural gas and liquefied natural gas. Some on Wall Street estimate that the company will have a compound annual growth rate of over 5% for the next five years.

Chevron shareholders receive a 3.58% dividend. Jefferies has a $149 price target, and the consensus target is $139.53. The shares traded at $128.05 early Monday.

Diamondback Energy

This is a top Permian Basin play for more aggressive accounts and is a top pick across Wall Street. Diamondback Energy Inc. (NASDAQ: FANG) is an independent oil and natural gas company headquartered in Midland, Texas, and focused on the acquisition, development, exploration and exploitation of unconventional, onshore oil and natural gas reserves in the Permian Basin in West Texas.

Diamondback’s activities are primarily focused on the horizontal exploitation of multiple intervals within the Wolfcamp, Spraberry, Clearfork and Cline formations.

Wall Street analysts have noted in the past the company’s top-tier asset base, solid accretive additions and financial discipline, which they think allows for not only continued solid cash flow, but could put the company in play as a takeover target. Diamondback continues to drill some of the most economical wells in the United States as efficiencies improve, costs decrease and activity remains in the better regions.

The $162 Jefferies price target compares with the $156.67 consensus target and a share price Monday morning of $133.35.

ONEOK

The volatile price of natural gas over the past year has weighed some on this top energy stock. ONEOK Inc. (NYSE: OKE) primarily engages in natural gas transportation, storage and natural gas and natural gas liquids (NGLs) gathering, processing and fractionation in the Bakken, Mid-Continent and Permian. The company recently closed the roll-up of its underlying master limited partnership, ONEOK Partners.

The company has a strong presence in the Oklahoma SCOOP/STACK (NGL gathering/takeaway system, G&P), the Williston Basin (G&P, NGL takeaway) and the Permian Basin (NGL gathering, NGL takeaway, natural gas takeaway), which analysts feel provides high-return growth opportunities.

Jefferies is also positive on the company’s primarily fee-based earnings, which account for 90% of the total earnings.

Investors receive a 5.26% dividend. Jefferies has set its price objective at $67. The consensus target is $64.63, and shares traded at $64.40 on Monday.

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It is important to remember that energy stocks are still playing catch-up to the actual price of oil, and while that price could very well fluctuate, it’s a good bet it stays over the $60 a barrel mark, maybe even the $70 level. That is a money-maker for most companies in the sector.

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