Credit: Shutterstock photoBy BillionairesPortfolio.com
The price of oil has been cut in half in less than five months. And along this path of one of the sharpest declines on records, the egos of Wall Street experts have been shattered.
Over the past several months, they have predicted numerous bottoms in the world’s most traded commodity. And given the speed and depth of the decline, they were quickly proven wrong.
As price continued to slide, the expert voices became less frequent and more muted. And by the time crude broke into the 40s, all of the sudden, the switch flipped, and many bulls became bears. For example, on January 12th, Goldman Sachs cut its forecast on oil prices from the $80s to the $30s. That’s a huge shift. This morning, CNBC reports that speculative short positions on crude oil hit a five-year high last week.
Capitulation is typically a sign that a bottom is near. In this case, not only have the bulls capitulated, but the world has become quite bearish on the outlook for oil. And that creates an even bigger vulnerability for a reversal, given that the shorts in the market are likely not very convicted.
Sure enough, after oil put in a low of $43.57 on Thursday, it followed up Friday with the sharpest one day gains since 2012, rising more than 9% as some of the speculative shorts in the market, no doubt, ran for the exit doors.
A Must-See Chart
For those looking for reasons to believe a bottom in oil is here, below is a chart you might be interested in seeing. On Thursday of last week, crude bounced from a very significant technical level, a 16-year rising trendline.
As you can see in the chart, the long-term rising trend for oil started in December of 1998. The price of oil touched the line in late 2001, and again in late 2008 – each time bouncing aggressively off of that trendline. From those dates, within twelve months the price of oil was 160% higher, 100% higher and 146% higher, respectively.
Adding to this technical picture, Billionaire energy mogul, T. Boone Pickens, has recently predicted that oil prices would be near $80 by the fourth quarter of this year. His oil prediction is based on the thesis that U.S. energy companies will drastically cut back on production. That would decrease the supply of oil produced, eventually driving prices higher again.
Pickens said the number of rigs drilling for oil in the U.S. declined at the second biggest weekly rate in more than 24 years.
If, in fact, oil has bottomed, and if Boone Pickens is right about $80 oil, there is a tremendous opportunity to buy beaten down energy stocks, especially those that historically demonstrate a high correlation to oil prices.
With that said, below are ten stocks that all have 90% or higher correlation to crude oil, and a market cap above $1 billion:
1) Whiting Petroleum (WLL)- Whiting currently trades at $30.94. This stock traded $61.94 last November, the last time oil was above $80. That’s 106% higher than its current share price.
2) Linn Energy (LINE) - Linn currently trades at $10.37. This stock traded $25.05 last November, the last time oil was above $80. That’s 142% higher than its current share price.
3) Denbury Resources (DNR) - Denbury currently trades at $7.20. This stock traded $12.46 last November, the last time oil was above $80. That’s 73% higher than its current share price.
4) Patterson-UTI Energy (PTEN) - Patterson-UTI currently trades at $17.25. This stock traded $23.27 last November, the last time oil was above $80. That’s 35% higher than its current share price.
5) SM Energy Company (SM) - SM Energy currently trades at $39.31. This stock traded $56.33 last November, the last time oil was above $80. That’s 43% higher than its current share price.
6) EP Energy Corporation (EPE) - EP Energy currently trades at $10.63. This stock traded $14.67 last November, the last time oil was above $80. That’s 38% higher than its current share price.
7) Freeport McMoran (FCX) - Freeport currently trades at $17.00. This stock traded $28.53 last November, the last time oil was above $80. That’s 68% higher than its current share price.
8) Helmerich & Payne (HP) - HP currently trades at $61.46. This stock traded $86.97 last November, the last time oil was above $80. That’s 42% higher than its current share price.
9) Haliburton Company (HAL) - Haliburton currently trades at $40.75. This stock traded $55.19 last November, the last time oil was above $80. That’s 35% higher than its current share price.
10) Continental Resources (CLR) - Continental currently trades at $46.02. This stock traded $56.41 last November, the last time oil was above $80. That’s 23% higher than its current share price.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
