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Welcome to Episode #168 of the Value Investor Podcast
Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio, shares some of her top value investing tips and stock picks.
One of the most hated industries of 2019 continues to be energy, especially the Exploration and Production companies, or E&Ps.
After rebounding to start 2019, the E&P stocks are on the decline again as the year ends with some hitting multi-decade lows.
The SPDR Exploration & Production ETF (XOP - Free Report) has fallen to new lows since its inception in 2006. It’s down 24.1% year-to-date.
When Wall Street runs away, value investors have to run in.
But are these values or traps?
Definition of a Value Trap Versus a Value Stock
Remember, to determine whether a stock is a true value, you have to look beyond the P/E or the P/S ratios.
Look at the earnings estimates. Are they on the rise from 2019 to 2020? Do analysts see earnings growth, or an earnings decline, next year?
Value investors want to get their companies cheap, but they also want growth.
A value stock is cheap but also has earnings growth.
Energy Stocks: Values or Traps?
1. CNX Resources Corporation (CNX - Free Report) is one of the largest independent natural gas producers in the US. It recently raised 2020 free cash flow guidance. It will use the FCF in 2020 to buy back debt and do share buybacks. It trades with a forward P/E of 8.7. Is it a value or a trap?
2. Matador Resources Company (MTDR - Free Report) is focused on oil and natural gas production in the Delaware Basin in Southeast New Mexico and West Texas but also operates in South Texas, Northwest Louisiana and East Texas. Shares have fallen 11.2% year-to-date. It now trades with a forward P/E of 12.7. Is it a value or a trap?
3. Pioneer Natural Resources (PXD - Free Report) has a $21.4 billion market cap and is one of the biggest players in the Permian Basin. Year-to-date the shares are down 3.8%. It currently has a $2 billion share buyback program and just recently raised the dividend, which now yields 1.4%. With a forward P/E of 15.3, is it a value or a trap?
4. Diamondback Energy (FANG - Free Report) shares are down 15% year-to-date. It’s headquartered in Midland, Texas, one of the fastest growing cities in America. Shares are trading with a forward P/E of 11.9. Is it a value or a trap?
There are 70 companies in Zacks Exploration & Production industry category and none are Zacks Rank #1 (Strong Buys). Just two are Zacks Rank #2 (Buy) stocks.
What else do you need to know about the E&Ps?
Tune into this podcast to find out.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Image: Bigstock
Energy Stocks: Values or Traps?
Welcome to Episode #168 of the Value Investor Podcast
Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio, shares some of her top value investing tips and stock picks.
One of the most hated industries of 2019 continues to be energy, especially the Exploration and Production companies, or E&Ps.
After rebounding to start 2019, the E&P stocks are on the decline again as the year ends with some hitting multi-decade lows.
The SPDR Exploration & Production ETF (XOP - Free Report) has fallen to new lows since its inception in 2006. It’s down 24.1% year-to-date.
When Wall Street runs away, value investors have to run in.
But are these values or traps?
Definition of a Value Trap Versus a Value Stock
Remember, to determine whether a stock is a true value, you have to look beyond the P/E or the P/S ratios.
Look at the earnings estimates. Are they on the rise from 2019 to 2020? Do analysts see earnings growth, or an earnings decline, next year?
Value investors want to get their companies cheap, but they also want growth.
A value stock is cheap but also has earnings growth.
Energy Stocks: Values or Traps?
1. CNX Resources Corporation (CNX - Free Report) is one of the largest independent natural gas producers in the US. It recently raised 2020 free cash flow guidance. It will use the FCF in 2020 to buy back debt and do share buybacks. It trades with a forward P/E of 8.7. Is it a value or a trap?
2. Matador Resources Company (MTDR - Free Report) is focused on oil and natural gas production in the Delaware Basin in Southeast New Mexico and West Texas but also operates in South Texas, Northwest Louisiana and East Texas. Shares have fallen 11.2% year-to-date. It now trades with a forward P/E of 12.7. Is it a value or a trap?
3. Pioneer Natural Resources (PXD - Free Report) has a $21.4 billion market cap and is one of the biggest players in the Permian Basin. Year-to-date the shares are down 3.8%. It currently has a $2 billion share buyback program and just recently raised the dividend, which now yields 1.4%. With a forward P/E of 15.3, is it a value or a trap?
4. Diamondback Energy (FANG - Free Report) shares are down 15% year-to-date. It’s headquartered in Midland, Texas, one of the fastest growing cities in America. Shares are trading with a forward P/E of 11.9. Is it a value or a trap?
There are 70 companies in Zacks Exploration & Production industry category and none are Zacks Rank #1 (Strong Buys). Just two are Zacks Rank #2 (Buy) stocks.
What else do you need to know about the E&Ps?
Tune into this podcast to find out.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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