Wall Street’s Favorite Oil Stocks for 2022, Including an Obscure
Several analysts and strategists expect energy stocks to outperform the overall market in 2022, as they did in 2021. Energy tends to do well in inflationary environments, and oil and gas stocks and Gases in particular have lagged behind for so long that they may be due for some time. extended return. Investors are already making big bets on rising oil prices.
Mark Haefele, chief investment officer for global wealth management at UBS, noted on Wednesday that sector stocks were lagging oil prices, so they still have room to rise. “The 35% rise in the MSCI World Energy Index in 2021 was smaller than the 50% rise in oil prices, and we expect a catch-up this year,” he wrote.
Analysts sent in notes with their top oil and gas picks for 2022. Several of them highlight stocks with significant free cash flow. Others see a rebound coming for oil and gas services stocks, which have struggled in recent years as producers cut spending.
Among the stocks receiving the most attention is mid-sized Denver producer
(OVV), whose strong cash flow prospects could give it an advantage. Ovintiv stock has doubled in the past year, recently trading at $ 39, but some on Wall Street believe its rally is just beginning.
Truist analyst Neal Dingmann said investors should consider a “dumbbell approach” with two baskets of stocks – buying big, high-quality names that offer high dividends and buyouts, while also buying small cap stocks with attractive valuations. Her favorite big names include
(MRO). The little actions he loves include
Earth Stone Energy
Northern Oil and Gas
(NOG), Ovintiv and
Forest ranger oil
(ROCC). And he chooses two “story” actions:
Bank of America analyst Doug Leggate also likes Occidental, Apache, and Ovintiv, as well as
(HES), as investors will start to notice improvements in these companies and their valuations may improve. For Occidental, that includes possible returns to shareholders after years of debt issuance. He likes too
(XOM), given “renewed confidence in its dividend prospects”.
In a separate note, Bank of America analyst Chase Mulvehill wrote that oil services stocks were “coming back from the bottomless pit” as US producers in particular spend more on drilling. Its main actions for 2022 include
Nextier Oilfield Solutions
At Citigroup, analyst Scott Gruber’s primary North American inventory of oil and gas equipment and services is the Houston-based company.
Ovintiv was also made a top pick list at UBS, where analyst Lloyd Byrne praised the improvement in payments to the company’s shareholders. Her other choices include
Pioneer of natural resources
Tudor Pickering Holt analysts prefer Cenovus and
(DVN), “given the massive free cash flow and accelerating returns on capital” while
(TRGP) “takes our first place in the middle group as the repayment of capital shifts from a focus on debt to shares”. They recommend Phillips 66 in refining and Baker Hughes in petroleum services “given the best returns on capital of its peers.”
Morgan Stanley’s Devin McDermott, like other analysts, recommends investors focus on stocks with more “liquid exposure” than on gas. Natural gas prices have skyrocketed in 2021 and have remained high, but may be more volatile than oil this year. He also likes businesses that generate cash and those that are large enough to absorb inflationary pressures. Some of his favorite names include Apache, ConocoPhillips, Occidental, and Ovintiv. “On the gas side, we continue to favor
(EQT) compared to his peers, ”he wrote.
Write to Avi Salzman at email@example.com