Analyst Action: These Resource Stocks Are On Watch!
It’s Monday, and that means it’s time for a look at compelling analyst upgrades and downgrades.
In case you’re unaware, analysts at the biggest banks and investment firms on Wall Street provide research on a multitude of natural resource companies. It’s not always the case, but most times a notable bullish change in a respected analyst’s outlook can have a significant influence on a company’s share price.
Of course, their ratings changes aren’t always positive…
When an analyst applies a big downgrade, shares can lose ground quickly.
After all, it’s not a great idea to be fully invested in a company that’s falling out of favor with Wall Street. At the very least, a downgrade can slow buying activity, which opens the door to lower prices.
Either way, it’s important to keep an eye on the analyst activity. Doing so can give you a substantial leg up on the market.
Here are last week’s natural resource company ratings changes that caught my eye…
Halliburton (HAL)- Analysts are jumping on the HAL bandwagon after the company bought oil services competitor Baker Hughes (BHI) last week. Credit Agricole, Deutsche Bank, Jefferies Group, and Argus all have a “buy” or “outperform” rating on HAL. Price targets range from $64 to $69.
Chesapeake Energy (CHK)- With natural gas prices on the rise, analysts at Sanford C. Bernstein upgraded CHK to “outperform” with a $32 price target. What’s more, CHK recently sold some of its Marcellus acreage to Southwestern Energy (SWN) in a $5 billion deal. The cash influx will help CHK ease its massive debt load. With shares trading at $24, Bernstein’s target represents 33% profit potential.
Marathon Petroleum (MPC)- Goldman Sachs initiated coverage with a “buy” rating and $127 price target on the oil refiner. With shares crossing at $96, Goldman’s target is a 32% premium to current prices.
Laredo Petroleum (LPI)- This Permian Basin operator was upgraded from “accumulate” to “buy” with a $25 price target at KLR Group. Like most oil E&P companies, LPI suffered a dramatic downturn in the second half of 2014. But in my and many other analysts’ opinion, the recent industry selloff is presenting an enormous long-term profit opportunity. With LPI shares currently trading at $17, KLR’s target represents 47% upside profit potential.
EOG Resources (EOG)- As you may remember from past articles, EOG has received a flurry of upgrades the past few weeks. Atlantic Securities joined the party last Thursday by upgrading the international oil and gas producer to “overweight” from “neutral”. All told, EOG now has 23 buy ratings and 3 hold ratings.
Statoil ASA (STO)- The Norwegian oil and gas producer was upgraded from “neutral” to “overweight” at HSBC. The highly respected firm also upgraded Royal Dutch Shell (RDS-A) to “overweight” last week.
There you have it. What you see above are the most captivating, and potentially profitable, ratings changes I came across over the past few days. Shares prices may already be reacting to the ratings and/or price target adjustments.
Now remember…
Just because an analyst has a bullish view on a company doesn’t mean you should dump all your money into the company’s stock. Do your own due diligence and always use correct position sizing and risk control measures in your trades.
If you’d like me to do the work for you, check out the Options Profit Pipeline. This one-of-a-kind options service focuses specifically on commodities and the companies producing them.
Until Next Time,
Justin Bennett
Category: Natural Resource Stocks
