This is certainly an odd economy. On one hand, the delta variant is a dark shadow over how long economic expansion lasts. On the other, the economy is booming and oil stocks have gone from zeros to heroes in the past year.
The S&P Global Oil Index, which measures the performance of 120 of the largest publicly traded oil & gas exploration & production (E&P) companies in world, is up nearly 27% in the past year.
But most of the oil stocks below haven’t fared as well.
What’s more, my Portfolio Grader measures and grades stock’s fundamentals, momentum, dividend safety and also gives a total rating. The one thing these stocks all have in common is they all have D’s or F’s on their momentum scores. That means in this energy bull market, these stocks are consciously being ignored.
Maybe things will improve, but right now there are too many other better opportunities to hold and hope.
- Cabot Oil & Gas (NYSE:COG)
- Comstock Resources (NYSE:CRK)
- Delek US Holdings (NYSE:DK)
- China Petroleum & Chemical (NYSE:SNP)
- Suncor Energy (NYSE:SU)
- Ultrapar Particpacoes (NYSE:UGP)
- YPF (NYSE:YPF)
Oil Stocks to Sell: Cabot Oil & Gas (COG)
The Marcellus Shale is one of the largest shale fields in the U.S., running 600 miles across the Appalachian mountain range running from New York to Ohio to Kentucky. The U.S. Geological Survey estimates there are 84 trillion cubic feet of recoverable natural gas and 3.4 billion gallons of natural gas liquids (NGLs). NGLs include ethane, butane, propane, isobutane and other industrial, commercial and consumer chemicals.
COG is an E&P that makes its living in the Marcellus Shale. That sounds pretty good right?
Well, the stock is down almost 6% year-to-date, and 17% in the past 12 months. Part of its recent troubles have been it announcement in May to merge with Cimarex Energy (NYSE:XEC). Both companies have similar market caps around $6 billion. But the market didn’t treat the deal with enthusiasm.
This isn’t the time to get involved with COG.
The stock has a D Portfolio Grader total rating.
Comstock Resources (CRK)
While CRK has been around for over 100 years, it’s still one of the smaller E&Ps, with a market cap just above $1 billion. But given the volatility of the energy patch and oil stocks in particular, a focused company that sticks to its knitting can be a good thing.
CRK focuses on the Haynesville Shale in East Texas, focusing on natural gas. The trouble with natural gas E&Ps is the fact there’s a production glut and prices, while pretty good, are slipping.
Some optimists think that low inventories may soak up some of that over production, but most of the money in the sector isn’t optimistic. And that’s reflected in CRK’s performance. It’s up nearly 31% year-to-date, but it has lost 1% in the past month. That’s not good momentum.
The stock has a D Portfolio Grader total rating.
Oil Stocks to Sell: Delek US Holdings (DK)
Downstream energy companies operate in sectors that include refining, retail and logistics. And for the past 20 years, DK has operated in all three sectors growing by smart acquisitions across the South and Southwest.
It only has a $1 billion market cap but it has put together a nice group of assets. But the pandemic isn’t helping with demand. And its growth through acquisition strategy has a lot of red ink in on its balance sheet. This kind of market isn’t going to help that.
DK stock is floundering, slightly positive year-to-date, but down 31% in the past three months — in the teeth of driving season.
The stock has a D Portfolio Grader total rating.
China Petroleum & Chemical (SNP)
Better known in the West as Sinopec, SNP is the largest oil refiner and integrated oil company in the world. And China is a leading oil importer as well as one of most active exploration countries in the world. And much of that is done by Sinopec.
But Sinopec’s performance, aside from its 6% dividend is flat year-to-date. But it’s the past three months’ performance that’s most revealing. The oil stock has lost 16%. And there’s growing evidence that the Chinese government is expecting oil prices to start to fall in coming months. That’s never good news for integrated oil companies.
Also, with tensions rising between Washington and Beijing regarding Chinese stocks in general, this isn’t a good time to enter Chinese oil stocks, even the big ones.
The stock has a D Portfolio Grader total rating.
Oil Stocks to Sell: Suncor Energy (SU)
SU is one of Canada’s largest oil stocks. It’s an integrated oil company with operations from oil sands to exploration and production in far-flung countries like Syria, Libya and Norway. It has been around for more than a century.
In late July, SU announced Q2 earnings and they were good. The beat analysts estimates across sectors and compared to year ago levels. The trouble was, as is the case in markets like this, is it muted it future guidance on the production side. The stock down 6% in the past month, and 19% in the past three months.
With the broader global economic outlook unclear, this isn’t the time to think this is one of the oil stocks that’s worth bottom fishing right now. The momentum isn’t its friend.
The stock has a D Portfolio Grader total rating.
Ultrapar Particpacoes (UGP)
This diversified downstream player has made this list for two reasons: Brazil and coronavirus.
Not only is the resurgence of the delta variant and waning immunity for those vaccinated starting to slow economies, but Brazil is getting hit particularly hard. Some Brazilian companies are coming through this period well, but its energy industry isn’t.
And given Brazil’s troubled economy, its energy markets are going to suffer more than other industries, like agriculture. Brazilian oil stocks are not in favor right now and that obvious in UGP’s performance. It’s down 17% in the past month and has lost nearly 40% year-to-date. This is a falling knife and its 3.8% dividend isn’t going to help.
The stock has a D Portfolio Grader total rating.
Oil Stocks to Sell: YPF (YPF)
Argentina’s integrated oil company is slightly better off than Brazil’s, but that’s still cold comfort for investors. If the major industrialized nations are struggling to keep growth on track, South America’s leading economies are having a tougher row to hoe. And its oil stocks in particular.
And given the unimpressive vaccination rates in the U.S. and Europe, Argentina’s is lower as the delta variant hits. A strong U.S. dollar drives oil prices higher, and a weaker economy mean lower demand. That’s a bad combination.
YPM is up more than 4% year to date and has gained 12% in the past month. But the stock is still down 9% in the past 12 months. It’s not out of the woods yet and there are more promising options out there.
The stock has a D Portfolio Grader total rating.
On the date of publication, Louis Navellier has no positions in the stocks in this article. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article. The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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