- (0:30) - Are Energy Stocks Good Value Investments Right Now?
- (4:15) - Tracey’s Top Stock Picks: Creating a Strong Watchlist
- (20:35) - Episode Roundup: SLB, NEX, EOG, OXY, XOM
Welcome to Episode #330 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.
It’s time to look at the energy stocks again. After being the best performing sector in the S&P 500 two years in a row, they are now the worst performing sector this year.
Crude and natural gas prices have sunk from last year’s highs after the Ukraine War spooked the market. Traders have abandoned the stocks again for the better performing semiconductors and AI stocks.
But with Wall Street ignoring energy, the stocks are again cheap.
But are they true values or traps?
Difference Between a Value and a Trap
Remember, there is a difference between value stocks and those that are value traps. The key is to look at earnings.
Are the earnings expected to rise year-over-year? If so, then there might be a true value there. Investors are getting rising earnings on sale. A trap is when the earnings are on the decline.
5 Energy Stocks: Values or Traps?
SLB, formerly known as Schlumberger, is a global oil services company. The services business is not as tied to the daily price movements of oil and natural gas.
SLB shares have sunk in 2023, falling 19.3%. It’s gotten cheaper. SLB trades with a forward P/E of 14.7. It also has a PEG of 0.5. A PEG ratio under 1.0 indicates a company is both a value and has growth.
Is SLB a value or a trap?
- NexTier Oilfield Solutions Inc.
NexTier Oilfield Solutions is a small cap services company, with a market cap of $1.8 billion.
Shares of NexTier Oilfield Solutions have sunk in 2023. It’s down 14.2% year-to-date. And now it’s dirt cheap. NexTier Oilfield Solutions has a forward P/E of just 2.8.
How much cheaper can NexTier Oilfield Services get?
EOG Resources is one of the big independent oil and natural gas producers. Shares of EOG Resources are down 15.4% year-to-date but are not yet at the 2023 lows that were hit in March.
Still, EOG Resources is cheap with a forward P/E of 9 and a PEG ratio of just 0.3. It has both value and growth. Analysts have had a tough time with earnings estimates this year as crude and natural gas prices have dropped. 4 estimates are up and 7 have been cut in the last 30 days.
Is EOG Resources a value or a trap?
Occidental Petroleum is a large cap oil and natural gas producer who also is a big chemical producer. It’s been in the public eye the last few years as Berkshire Hathaway has taken a large position in the company. In 2023, Warren Buffett continued to add to his position.
Shares of Occidental Petroleum have fallen 6.4% year-to-date but are up off the 2023 lows. Occidental Petroleum is cheap. It has a forward P/E of 11.4 and a PEG ratio of 0.5. Analysts are bearish on 2023, with 8 earnings estimates cut and only 1 estimate raised in the last 30 days.
Is Buffett getting it right on Occidental Petroleum?
Exxon Mobil is a big, integrated oil company with exploration and production, refining, distribution, service stations and chemicals. Exxon Mobil is one of the largest operators in Guyana.
Shares of Exxon Mobil are down 5.4% in 2023. Still, the shares are cheap with a forward P/E of 10.9 and a PEG ratio of 0.6. Exxon Mobil also pays a dividend, yielding 3.5%.
Analysts are bearish, however, with just 1 estimate revised higher in the last 30 days, and 5 estimates revised lower.
Is Exxon Mobil a value or a trap?
Tune into this week’s podcast to find out.