At this point in the tumultuous year, it would be nice for investors to have a comprehensive tool that will allow them to compare their own stock portfolio with the portfolios that are pulling in the most gains. TipRanks’ Smart Portfolio tool brings just that.
Essentially, the Smart Portfolio tool enables investors to gain a better insight into how their portfolios are performing relative to the best-performing portfolios on TipRanks. This way, they can rearrange their portfolios to ensure optimal returns.
The tool helped us find that with a sector allocation of 50.11%, the technology sector still runs favorite among the top-performing portfolios on TipRanks.
However, ever since the Russia-Ukraine war started, the energy sector has been in the limelight, benefiting from burgeoning oil and energy prices. Despite a recent decline in oil prices amid growing fears of a recession, many experts believe that the impact of any recession will have little impact on the energy sector.
Evidently, it makes sense to use this trend to discuss stocks from this sector. Thus, using the Smart Portfolio tool, we sorted out two stocks in the energy sector that are worth considering.
Let us get right to it without further ado.
Exxon is a big name in the energy sector, engaging in the exploration, development, and distribution of oil, gas, and petroleum products.
Earlier this month, Exxon filed an 8-K report which showed remarkable earnings and cash flows on the back of exceptionally wide oil refining margins.
Following the SEC filing, Bank of America Securities analyst Doug Leggate reiterated a Buy rating and a price target of $128. Encouraged by the numbers indicated in the 8-K, Leggate raised his second-quarter EPS estimate to $4.01 from $3.11. He also believes free cash flow will increase about 60% from Q4 2021.
“Note that XOM changed reporting segments to include Energy products / Chemical products and Specialties (vs. Downstream & Chemicals previously); but the net takeaway is still that sequential guidance is dominated by a strong sequential jump in realized refining margins – up $5.4 billion quarter -over-quarter,” explained the analyst.
Most Wall Street analysts are bullish on Exxon, with the stock having a Strong Buy consensus rating based on 11 Buys and three Holds. The average price target for Exxon is $109.33, representing a 29.3% upside from current price levels.
The other energy stock which is helping the top-performing portfolios on TipRanks build wealth is Chevron, which deals in the exploration, development, and production of crude oil and natural gas. The liquefaction of natural gas, transportation of crude oil and liquefied natural gas, and oil refining are also a part of Chevron’s wide business.
Apart from the tailwinds of being in the hot energy sector, the company’s relatively strong balance sheet is a huge attraction for investors. Although the company’s balance sheet carries net debt, it is not surprising being in a sector that requires heavy investments and funding.
Moreover, its debt-to-equity ratio, which measures how much the company is leveraged, is relatively modest at around 20% in 2021, compared to the sector average of about 49%.
Moreover, the company also has the security of a high investment grade rating of AA from S&P Global (SPGI), which helps keep Chevron’s borrowing rates low.
The above points reflect the discipline in capital spending that is followed by the energy major, and this is expected to help the company manage any volatility in commodity prices by efficacy generating desirable cash flows even in an unstable business environment.
Recently, in the light of the possible recession and other near-term macroeconomic concerns, Trust Securities analyst Neal Dingmann reiterated a Hold rating on Chevron but trimmed his price target to $170 from $181.
The analyst was upbeat about the company’s near-term growth driving low-cost Permian projects. He said that he still sees a “significant Permian production ramp that includes associated gas volumes, along with the two recent LNG agreements that should allow for higher gas netbacks than peers assuming attractive international holds pricing.”
Chevron currently has a Moderate Buy consensus rating on Wall Street, based on seven Buys, six Holds, and one Sell. The average price target on Chevron currently stands at $179.79, reflecting upside potential of 30.6% from its current price.
Conclusion – These Stocks May Help Your Portfolio’s Performance
Even though the tech sector is holding most of the TipRanks investors’ money, the two oil stocks are a part of TipRanks’ Best Performing Portfolios. This makes them worthy of consideration if one wants to add value to their present portfolio.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.