Investors wanted to stay far away from the oil patch in 2020. Millions of Americans sheltered in place in an effort to slow the spread of the novel coronavirus. Airlines were grounded. Cruise lines were under a no sail order. After that the law of supply and demand took over.
It’s not a new story. When the economy is going well, it’s been good news for oil stocks. And when the economy struggles, the opposite is true. But neither oil companies nor investors ever had to account for a global pandemic. And now investors have to decide what to do with oil stocks as they are in recovery mode.
The price of crude oil recently went back over $60 a barrel. And with millions of Americans getting vaccinated every week, the pent-up demand is beginning to gain momentum. As it does investors are beginning to realize that there’s an opportunity in oil and gas stocks.
There’s ample evidence to show that renewable energy sources are going to be a significant part of America’s future. However in the here and now, oil and gas companies still have a significant role to play. With that in mind, these three stocks look to be in growth mode for opportunistic investors.
There has been much written and discussed about the closing of the Keystone pipeline. Putting that aside, there is still drilling activity happening. That’s bullish for Baker Hughes (NYSE:BKR). The company provides oilfield products and services. And Baker Hughes is reporting increased activity in a number of oil fields, including in the Permian basin – the most prolific basin in the United States.
As long as oil companies are drilling, there will be a demand for the products that Baker Hughes provides. BKR stock is down 13.5% since closing above $25 on February 24. However, the stock is still up 109% in the last 12 months. Furthermore, the consensus opinion of analysts gives the stock a buy rating and recent price targets suggest that the stock has significant upside.
Plus, there is reason to believe that Baker Hughes has a future in the green energy economy. The company recently announced that it has entered into a global exclusive licensing agreement with SRI International to use SRI’s Mixed Salt Process for carbon capture.
Hess Corporation (NYSE:HES) is an independent energy company that is involved in crude oil and natural gas exploration and production. HES stock remained fairly stable during 2020. In fact, there was a bullish surge in early summer as investors jumped the gun on a recovery.
However, since the initial EUA for a Covid-19 vaccine, HES stock has been pointing true north. The stock is up 100% since November 5. That just confirms that many investors understand that the country will still be driving internal combustion vehicles for at least a little while longer.
Hess also has a consensus buy rating from the 16 analysts that offer ratings. And while the consensus price target suggests a lower price, recent price targets are significantly higher. Investors can also take confidence from the fact that HES stock is well supported with 79% institutional ownership.
The last stock on the list is a play on the idea that millions of Americans may begin to start having a morning commute again. And that means that there are likely to be oil changes and other services that weren’t necessary when cars weren’t being driven.
That may be an oversimplification, but that’s part of the fundamental case for Valvoline (NYSE:VVV). In the first two quarters of the company’s 2021 fiscal year, Valvoline is already reporting 17% higher earnings per share and nearly 10% year-over-year revenue growth. That tracks nicely with the price of VVV stock that has climbed approximately 30% in that time.
Valvoline has 92% institutional ownership and also has a dividend that has grown for four consecutive years.
Before you consider Hess, you'll want to hear this.
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