To say this year's been brutal for the oil sector is an understatement. So what are the best oil stocks to buy 2020? Oil companies have been hemorrhaging profits akin to the Steamboat Geyser at Yellowstone National Park.
Amidst COVID-19, crude prices even went negative - yes, negative! How is that even possible? Unfortunately, this crater forced many oil companies into the ground, many filing for bankruptcy.
But, savvy investors know, wealth is made when stocks are at rock bottom prices. Does the saying buy low, sell high ring a bell? It appears we've plugged the leak, for now.
Best Oil Stocks to Buy 2020
Considering the global economy still runs on crude oil and prices are rising, it's time to look at some oil stocks to buy 2020. Two of our top oil stocks poised to shine in this rebound are Enbridge (NYSE: ENB) and EOG Resources (NYSE: EOG)
1. Enbridge - This Canadian Company Is Doing Something Right
For those of you who don't know, Enbridge is a company focused on energy generation, distribution, and transportation company.
Their pipeline network consists of three components: The Canadian Mainline system, regional oil sands pipelines, and natural gas pipelines.
But, there's more to Enbridge than just pipelines - they also own and operate a regulated natural gas utility and Canada's largest natural gas distribution company. Additionally, Enbridge generates renewable and alternative energy with 2,000 megawatts of capacity.
Ironically, shares in Canuk pipeline Enbridge tumbled close to 25% despite having no exposure to the volatility in the oil market. How does that make sense?
Well, let me explain. Even if we as consumers aren't using all the oil in Enbridge's pipelines, we still have to pay to use it. Because of this, Enbridge is pretty confident they'll deliver on their 2020 cash flow forecast.
2. Let's Talk Dividends on Oil Stocks to Buy 2020
It's been a brutal year for dividend investors. For proof look no further than the 175 publicly traded companies that have shed their payouts in half, with many stopping them entirely.
Not surprisingly, the oil sector was one of the hardest-hit by those dividend cuts, as many payouts plunged along with oil prices.
When deciding which oil stock to buy in 2020, wise investors pay attention to the dividends offered. And in the case of Enbridge, they deliver.
For the last 25 years, I hasten to add that they've risen their dividends, putting them as one of the top dividend stocks on the Toronto Exchange.
Also encouraging is the fact that their dividends increased at a compound annual growth rate (CAGR) of 14% since 2008. That's nothing to sneeze at. Despite the lower flow of oil through their pipelines, their dividends are safe.
Meanwhile, the future looks bright for Enbridge, with plenty of growth and pipeline expansion ahead. That should give it the fuel to continue growing its dividend, which it has done for the past 25 years.
If you want to swing oil stocks to buy 2020, make sure you have the best swing trading strategy. Swing trading isn't for the faint of heart right now.
3. Let's Talk EBITDA
When deciding which oil stocks to buy 2020, pay attention to the company's EBITDA or earnings before interest, taxes, depreciation and amortization.
EBITDA is a widely used metric of corporate profitability and can be used to compare companies against each other and industry averages. In simple terms, it helps us to use an "apples" to "apples" approach.
Investors should note that Enbridge's EBITDA has consistently risen the last number of years. Let me give you an example to put this into perspective.
In the first half of 2020, their EBITDA increased to $7.08 billion, up from $6.98 billion lat year. The company's diverse revenue streams and resilient businesses continue to drive its EBITDA and cash flows; despite lower throughput in liquid mainline volumes.
Depending on the charts and the market, oil stocks could be good bear market stocks to buy. However, CHECK THE CHARTS!
4. EOG Resources (NYSE: EOG)
Ranked 181st on the Fortune 500 list, EOG Resources, Inc. is another company involved in the crude oil and natural gas industry. Their primary focus is the exploration, development, production and marketing of the products I mentioned above.
5. Why Is EOG Resources Apart of Oil Stocks to Buy 2020?
Unlike other oil and gas companies, EOG Resources entered 2020 with a cash-rich balance sheet to the tune of $2.1 billion rich.
Least I forget, they recently amped that up to $2.9 billion by issuing low-cost debt. Despite incremental borrowing, EOG has one of the lowest leverage ratios in the oil and gas sector.
Meanwhile, they also have some of the lowest operating costs in the industry. Further to this, EOG has an enormous supply of drilling locations that bring in bank.
With premiums of around $30 a barrel, the company anticipates that it can generate enough cash to cover both their capital expenses and dividend payout this year.
Is It a Good Time to Invest in Oil Stocks?
- We saw oil get to negative pricing on the stock market earlier this year. Imagine, going to buy oil and seeing it trading negatively. Thankfully, oil has rebounded since that time. Make sure to check the charts of any oil stocks to buy 2020 before buying or selling. That'll be your best indicator on if it's a good time to invest in oil stocks.
1. Let's Talk Dividends on Oil Stocks to Buy 2020
Not surprisingly, many oil companies this year cut dividends because they needed the cash to square up their shaky balance sheets.
Luckily, EOG resources don't have that concern. And coupled with a healthy balance sheet and ultra-low-cost drilling operations, EOG Resources' dividend remains the most secure in the sector.
2. Zack's Earnings ESP Surprise
Many investors wonder if they should buy ahead of earnings in anticipation of stocks beating the estimates. With earnings coming up soon, EOG Resources may be one such company.
As of late, EOG Resources has had a favorable earnings estimate revision, which is generally a forerunner to an earnings beat. After all, analysts raised their estimates right before earnings.
Reading between the lines, I say this is a pretty good indicator of some favorable trends underneath the surface for EOG.
In fact, the broader Zacks Consensus Estimate is at a loss of 14 cents a share. However, the most accurate estimate for the current quarter is currently at a loss of 11 cents per share for EOG.
In plain terms, analysts just bumped up their estimates for EOG. Overall, this gives EOG resources a Zacks Earnings ESP of +21.99% heading into earnings season.
3. Analysts Price Targets
Of 27 Wall Street analysts looking at oil company EOG, 11 have given hold ratings, 16 buy ratings and 0 have given sell ratings.
According to analysts, the EOG oil stock's target price is $68.46, with a high price target of $111.00.
At the same time, EOG Resources has been the subject of 16 research reports in the past 90 days. One can see this as a reflection of strong analyst interest in this stock.
4. Why Is This Important?
When you crunch the numbers over the last ten years, a positive Zacks Earnings ESP has proven to be a very powerful tool.
In a recent backtest, stocks with a positive Earnings ESP along with a Zacks Rank of #3 (hold) or better, show positive surprises nearly 70% of the time. Further to that, these stocks have returned over 28% on average in annual returns.
Considering the fact that EOG has a Zacks Rank #2 (Buy) and an ESP in positive territory, savvy investors might want to consider buying this oil stock ahead of earnings.
Even if you miss buying before earnings, it's still a buy and hold for decades. You'll most certainly benefit from high dividend income and capital appreciation.
Your Next Steps
If you want oil stocks to buy 2020, you can certainly day or swing trade them for a more short term return. Now I know some oil stocks have pretty high share prices, but don't let that dissuade you.
Bullish Bears will show you a simple way to "buy" 100 shares of a stock without evening owning it. Yes, you read that right, and no, it's not a typo.
Join us today for free, and we'll show you how to get your hands on these oil stocks. With a little bit of hard work and a commitment to learning, profits will be flowing faster than the water and steam out of Yellowstone's geyser.
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