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Investment Ideas

The energy sector is constantly changing. We know that there is a high dependence on oil and I like to say that oil is the fuel for the world’s economy. With oil prices rebounding amid talk of an OPEC production cut investors are looking at the sector for some new ideas.

At Zacks Investment Research, I manage the Game Changers portfolio where I look for stocks that are positioned to benefit from large shifts in demand. It might be tech, it might be consumer staples and it might be energy. Right now, I hold two stocks in the energy space in the portfolio, but I want to review other potential additions as well.

Trusting the Rank

At Zacks, we focus most of our energy on earnings, and more specifically stocks that show positive earnings estimate revisions. The Zacks Rank is an algorithm that tells me which stocks are seeing the best earnings estimate revisions, and I use it on a daily basis to screen for stocks.

Helix Energy Solutions (HLX - Free Report) is a Zacks Rank #1 (Strong Buy) stock that has seen a great run over the last several weeks as it moved from $7 to more than $10 per share today. Last night the company presented a slide in a presentation that wasn’t especially positive, but the market doesn’t seem to mind. The company see FY16 revenues of $505M, down slightly from $510M that was the previously guided number. The reason the stock is up is that the Wall Street consensus was calling for $500M in revenue, so it is a slight uptick.

The company just posted earnings $0.10 when the Zacks Consensus Estimate was calling for a $0.04. That $0.06 beat is a 150% positive earnings surprise and just what I like to see in a candidate for my Game Changers portfolio.

Gushing Over Another Stock

Baker Hughes (BHI - Free Report) is a Zacks Rank #2 (Buy) and is slated to report earnings soon. The company is on a bit of a skid, as it has missed the Zacks Consensus Estimate in each of the last three reports.

I see the Zacks Consensus calling for revenue of $2.427B in revenue and a loss of $0.44 per share.

BHI isn’t really changing the game for me right now, but we will learn more about this stock following the earnings report which is expected out early next week.

Another Oil Name

Halliburton (HAL - Free Report) is also a Zacks Rank #2 (Buy) and coming off a solid earnings report. The company reported earnings of $0.01 when the Zacks Consensus Estimate was looking for a loss of $0.07. The $0.08 beat translates into a positive earnings surprise of 114%, and that is music to my ears.

Earnings estimates for next year are a little stagnant as they have not move moved that much over the last five months. In that time period, the number was as high as $0.90 and as low as $0.88 and is currently $0.89.

That said, the $0.89 looks great compared to a loss of $0.16, which is the current Zacks Consensus Estimate for FY16.

Not Oil, But Close

Energy Recovery (ERII - Free Report) was the Bull of the Day a few weeks ago and I strongly encourage you to check that article out. I go into the recent earnings history, estimate changes and valuation as well in that write up. ERII is not really oil, but they are involved in the industrial fluid flow markets.

ERII does a lot of work in the desalinization industry but is also a player in the oil and gas industry. Remember there is a large part of the eco-system of oil that is industrial products and services to help keep the world’s engine all greased up!

ERII is the exact type of stock that I look for in Game Changers.

Low Price, Big Potential

The other service I manage at Zacks is Stocks Under $10. This looks to leverage the Zacks Rank and stocks that are priced under $10. Right now, I only have 12 stocks in that portfolio and I am looking to expand it to the normal level of 15 names in the near future.

One potential addition is Precision Drill (PDS - Free Report) as it is a Zacks Rank #2 (Buy) and of course, priced below $10. The company is expected to report earnings tomorrow before the open so I will be watching it closely.

Confidential from Zacks

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Brian Bolan is a Stock Strategist for Zacks.com.

He runs Stocks Under $10 Investor service where he looks for low priced stocks that are seeing positive earnings estimate revisions. This popular service has seen some strong early returns and offers a free trial via the Zacks Ultimate service.

Brian also runs the brand new Zacks Game Changers where he looks for stocks that are disrupting their industries and reaping big gains.