Credit Suisse's Top 8 Energy Stocks: Devon Out, Concho In
The Energy sector has been the worst-performing market sector in 2015, and the Energy Select Sector SPDR ETF (NYSE: XLE) has fallen 20 percent versus the S&P 500’s 1.5 percent gain year-to-date. For the first time in two months, Credit Suisse analysts have updated their top Energy stock picks in eight different subsectors.
Here’s a full list of the names they chose.
1. Alternative Energy: SolarCity Corp (NASDAQ: SCTY)
Analyst Patrick Jobin sees the company as a “key beneficiary” in the trends toward residential solar and lower capital costs via use of financial vehicles.
2. Independent Refining: Marathon Petroleum Corp (NYSE: MPC)
Analyst Ed Westlake believes that the synergy of the company’s recently-acquired Hess Corp. (NYSE: HES) retail business are “exceeding plans” and is confident that the company will continue to benefit from self-help initiatives.
3. Integrated Oil & Gas: none
Credit Suisse has removed Marathon Oil Corporation (NYSE: MRO) as a top pick this month and has not replaced it with another pick in the Integrated Oil & Gas space.
4. MLPs: Genesis Energy, L.P. (NYSE: GEL)
Analyst John Edwards believes that the MLP is defensive in terms of its direct exposure to commodity price weakness and offensive in terms of the distribution growth expected following its recent acquisition of offshore assets from Enterprise Product Partners LP (NYSE: EPD).
5. Oil & Gas Exploration & Production: Concho Resources Inc (NYSE: CXO)
Westlake and Mark Lear believe that the company has “delivered outstanding operational performance in 2015” and praise the company’s aggressive spending cuts. Concho has replaced Devon Energy Corp (NYSE: DVN) as the new top pick in the space.
6. Oil Services & Equipment: Weatherford International Plc (NYSE: WFT)
Wicklund praises the company’s proactive moves, including “~20% of global headcount cut and >$1bn in annualized cost savings.” Weatherford replaces Franks International NV (NYSE: FI) as a new top stock on Credit Suisse’s updated list.
7. Oilfield Services & Marine Transport: Euronav NV (NYSE: EURN)
Analyst Greg Lewis believes the company has “ample flexibility for fleet acquisitions” and is free to return 80 percent of net income to shareholders via dividends.
8. SMID Cap Oil & Gas Exploration & Production: PDC Energy Inc (NASDAQ: PDCE)
Lear is impressed by the company’s projection of flat production growth in 2016 with as low as $200 million in capex in the event of continued weak oil prices.
Disclosure: the author owns shares of Weatherford.
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