Searching for beaten-down energy stocks to buy in anticipation of future gains is an uncertain science at best. Choosing which stocks to discard is equally risky.
Especially when faced with the prognostications of some experts who claim there’s an 85% chance the price of WTI will double over the next 12 to 18 months.
The experts are not perfect but their advice can be instructive. To that end, here are 7 securities a number of experts suggest may have worn-out their welcome in your portfolio.
Zacks points out a price-to-book of 3.12 and price-to-sales of 5.16, suggesting this company, which focuses on acquiring, developing, and exploiting properties for the production of crude oil and natural gas, might be overvalued. Negative earnings estimates have pushed Zacks EPS estimate down from $0.08 to $0.03 per share and precipitated a “sell” rating.
Jim Cramer’s TheStreet, sees the company’s largely solid financial position and reasonable debt as positives, but also cited the same weaknesses cited by Zacks. Nonetheless, TheStreet rates the stock a “hold.”
Cheniere Energy is focused on liquefied natural gas related businesses and ranked a “hold” by Zacks. Zacks sees the company as struggling to maintain short term liquidity and says its metrics suggest it too, like EPM may be overvalued.
Jim Cramer’s TheStreet rates Cheniere a “sell” based on many of the same factors noted by Zacks including disappointing historical performance, deteriorating net income and anemic growth in EPS.
Clayton Williams is an independent oil and gas company that operates mostly in Texas, Louisiana and New Mexico. Zacks rates Clayton Williams “sell” while Portfolio Grader has a “strong sell” rating on the stock.
Jim Cramer’s TheStreet concludes that the company's weaknesses, including feeble EPS growth, declining net income, high debt management risk, and weak cash flow make it too risky to hold.
This offshore oil driller was down 35% over last year with no sign things would likely get better any time soon. Offshore drilling space will likely be hit the hardest if oil continues to fall. Zacks, TipRanks and Investors Alley all rate Transocean “sell.” So does Jim Cramer’s TheStreet.
Denbury explores and produces oil and gas. Unfortunately, it’s running out of CO2 reserves, which the company will have to replace with man-made supplies.
The combination of a heavy debt load and no earnings in the face of potential lower oil prices does not bode well for a company that began 2016 down 80% over the previous year. Investors Alley recommends selling the stock. Zacks has a “hold” rating. Jim Cramer’s TheStreet says “sell.”
ExxonMobil has its fans (see Analysts On Oil Stocks You Should Consider Buying) but it has numerous detractors as well. One major problem for the company moving forward will be its disadvantage when it comes to finding new reserves.
If oil drops to $20, as some think it will, the company may have to consider increasing debt. That could be a very heavy lift. Zacks has a “hold” on XOM while both TipRanks and Investors Alley say “sell.” Jim Cramer’s TheStreet says “hold.”
As yet another offshore driller, Diamond faces a tough road ahead. Trading at 35 times earnings and down 40% over last year does not help.