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3 Strong Oil Picks for a Volatile Stock Market

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Stocks battled to stay in the green during Friday morning trading, with major indexes like the S&P 500 hoping to rebound after surrendering their year-to-date gains over the course of this brutal trading week. But a strong bump in oil prices helped the energy sector generate momentum on Friday morning, and if energy stocks continue to surge in this volatile market, investors need to be properly exposed to this sector.

This week’s volatility was inspired by new worries over an impending trade war with China, with President Trump on Thursday directing U.S. trade representatives to level tariffs on about $50 billion worth of Chinese imports.

Of course, some sectors are more at risk to trade concerns than others, and the energy sector itself is more contingent on the price of key natural resources. And those commodities moved higher on Friday morning. Specifically, May contracts for Light Crude Oil surged about 1.6% on the back of renewed hopes of extended OPEC production cuts.

Overall, the S&P 500 Energy sector gained nearly 1.3% in morning trading, making it the day’s biggest winner so far. With this in mind, let’s take a look at three strong oil stocks that stand to benefit from increasing prices, even if the broader market remains volatile.

1. Pioneer Natural Resources Company (PXD - Free Report)

Pioneer Natural Resources is a large, Texas-based independent exploration and production company. Analyst sentiment surrounding the stock has improved significantly over the past few weeks, evidenced by 14 positive revisions for the company’s full-year EPS estimates. Our consensus mark for Pioneer’s full-year earnings per share has gained $2.29 over the past 60 days.

This positive revision activity has helped PXD earn a Zacks Rank #1 (Strong Buy). Meanwhile, Pioneer is generating cash flow growth of nearly 21% right now, outpacing its industry’s average. The company is also projected to see earnings growth of 187% on the back of 22% revenue growth this year. And the stock is about $10 off its 52-week high, so investors have plenty of room to ride shares higher before it tests a new range.

 

2. Continental Resources, Inc. (CLR - Free Report)

Continental Resources is a crude-oil concentrated, independent oil and natural gas exploration and production company with operations in the Rocky Mountain, Mid-Continent and Gulf Coast regions of the United States. Analyst estimates have trended higher recently, with our Zacks Consensus Estimate for CLR’s full-year EPS gaining $1.01 within the past two months. That activity has helped the company earn a Zacks Rank #1 (Strong Buy).

Continental is another company that is improving its financial position, generating 35% cash flow growth and bringing in about $5 in cash per share right now. The company also presents better-than-industry-average net margin and RoE. CLR is another aggressive growth pick for 2018, with current estimates calling for revenue growth of 42% and EPS improvement of 359%.

 

3. CNOOC Limited (CEO - Free Report)

Cnooc Limited is a company that engages primarily in the exploration, development and production of crude oil and natural gas offshore China. Chinese oil producers should come out of any trade war relatively unscathed, as both countries have more important trade partners for black gold. CEO is also currently sporting a Zacks Rank #1 (Strong Buy).

Analyst estimates have also been trending higher for this company, evidenced by the Zacks Consensus Estimate for its full-year earnings moving $1.41 higher within the past 60 days. The stock also has a “B” grade for Value in our Style Scores system and is trading at just 9x forward 12-month earnings.

 

Want more market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!

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