Best energy calls

October 27, 2015 01:00 PM

Crude oil prices began plunging in the summer of 2014 and continued to drop in the fall when OPEC decided not to cut production. After a brief recovery crude plunged again this summer as Chinese equities crashed and an Iranian nuclear deal was struck. Volatility in the energy sector created opportunities. Here are the five most profitable calls made in the energy sector within the past 12 months. 

Goldman Sachs analyst Theodore Durbin made the most profitable rating within the energy sector over the past 12 months recommending to sell Linn Energy LLC (LINE) on May 18. Durbin’s prediction was based on Linn’s reliance on commodity prices and his long-term outlook on oil and gas prices. Shares of Linn closed at $12.41 on the day of Durbin’s rating and plunged to $2.88 in the following three months. Those who acted on his call that day would have profited 75.5%. Durbin has rated Linn five times since 2012, earning a 100% success rate recommending the company and a 34.1% average return per LINN recommendation when measured over a three-month horizon and no benchmark. Overall, he has a 66% success rate recommending stocks and a 7.7% average return per recommendation. 

On March 13, 2015, Wunderlich Securities analyst Jason Wangler reiterated a sell rating on Emerald Oil, Inc. (EOX) after the company missed fourth quarter 2014 earnings expectations. Wangler noted that “oil pricing and higher costs hurt [the company’s] bottom line.” Emerald Oil was priced at $20.20 on the day Wangler made his recommendation and closed at $5.02 three months later. Those acting on Wangler’s recommendation on March 13 would have earned a 75.1%. Wangler has rated Emerald three times, with a 100% success rate recommending the stock and a 73.1% average return. However, Wangler has a 42% success rate recommending stocks and a -6.6% average loss. 

Stephen Berman of Canaccord Genuity reiterated a buy rating on Sanchez Energy (SN) on Dec. 10, 2014. Sanchez has large holdings Eagle Ford and Tuscaloosa Marine Shale formations in Texas and Oklahoma. Berman said, “Substantial production and cash flow growth should be the drivers to a higher stock price.” At the time of Berman’s rating, SN was trading at $7.08. Three months later, SN shares were $12.40. Investors acting on Berman’s rating would have made a $75.1% profit. Berman has rated SN 13 times since 2013, earning a 38% success rate with an average loss of -1.8% per SN recommendation when measured over a three-month horizon. Overall, the analyst has a 35% success rate recommending stocks with an average loss of 10.7% per recommendation. 

Imperial Capital analyst Matthew Farwell downgraded his rating on Peabody Energy (BTU) from in-line to underperform on May 1, 2015. Farwell noted, “Given strong negative headwinds in coal due to sub-$3 natural gas, coal retirements and oversupplied seaborne met coal, we are bearish on Peabody.” 

Shares of Peabody Energy closed at $4.51 on the day Farwell downgraded his rating. Three months later, the stock’s price dropped to $1.20. Those who listened to Farwell’s recommendation would have earned a 72.8%. Farwell has rated Peabody Energy four times since 2014, earning a 67% success rate and a 27.4% average return per recommendation. On average, Farwell has a 55% success rate recommending stocks and an 11.6% average return per recommendation. 

Alex Brooks of Canaccord Genuity rated Seadrill (SDRL) a sell on Sept. 8, 2014. After Brooks praised the energy company’s modern fleet, he pointed out that the core of Seadrill’s business model “has always included borrowing against future cash flows. The $10.5 billion present value of its $19 billion backlog covers $11.9 billion of secured debt, which amortizes with the execution of those rig contracts.” At the time of Brooks’ rating, Seadrill was trading at $33.70. Three months later, the oil giant had plummeted to $11.57. Those who listened to Brooks’ rating would have earned 65.6% on the call over the following three months. Brooks has rated Seadrill five times in the past year, earning a 60% success rate  and a 16.6% average return per SDRL rating. Overall, Brooks has a 55% success rate recommending stocks with a 9.7% average return per rating.

About the Author

Uri Gruenbaum is the CEO and co-founder of TipRanks, whose proprietary technology is based on natural language processing & machine learning algorithms that constantly track, rank & measure financial experts based on their stock ratings, bringing accountability into the markets. @TipRanks