The VQScore system gives investors an inside edge and tells them exactly when stocks have entered the “strong buy” zone. When it hits this level, the stock is poised to break out – and most of the stocks we recommend have an upside of 100% in the next year.
That was the case with Dover Downs Gaming & Entertainment Inc. (NYSE: DDE), a sports entertainment firm that entered the “Buy Zone” and took off like a rocket. Shares surged more than 103% in mere months after we received this buy signal.
The same goes for Canadian Solar Inc. (NASDAQ: CSIQ), an alternative energy firm that entered the buy zone after the Q2 2018 GDP report. The stock was beaten down due to rising raw material costs fueled by a trade spat between the United States and Canada. Once it hit our Buy Zone, the stock reversed course and has surged more than 100% since.
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Today, the stars are aligning for a cheap energy stock that just entered the Money Morning VQScore system with a perfect 4.75.
With oil prices reaching a near-term bottom, a small oil and gas producer in Texas is an amazing buy. This stock is set to double or even triple over the next six months.
Here’s what you need to know…
Oil Prices Set to Rally in the Months Ahead
Oil prices are forming a near-term bottom during the first week of March. As BNP Paribas predicted in February, prices would effectively bottom out at the end of the first quarter.
But after that – watch out. Three major trends are forming a perfect storm that will push oil prices higher. Here they are:
First, OPEC and non-affiliated producers like Russia will cut daily production output by 1.2 million barrels per day (bpd). Those supply cuts will complement a reduction in exports by Saudi Arabia – OPEC’s largest member – to Asia.
Second, North American producers continue to face bottlenecks in key producing regions around the continent. Bottlenecks have curbed the flow of oil to refiners. Railcar use has picked up once again due to the lack of pipeline capacity.
An average of 718,000 barrels of oil is going by rail a day in the United States (an 88% year-over-year increase). Although U.S. production is sitting at record highs, a glut is inevitable. But according to BNP Paribas, this excess supply build-up won’t come to fruition until the end of the year.
Finally, the United States’ sanctions on both Iran and Venezuela continue to weigh on the global supply and demand balance. In February, consultants at FTI Consulting noted that even though Canada could pump more oil, the lack of transport will not reduce the market gap that has expanded.
Even though the United States pumps 11.9 million barrels per day, it still imported 500,000 barrels from Venezuela per day (part of a broader import average of 7.9 million bpd). Meanwhile, Iran, which exported about 1.25 million barrels per day in January, is expected to see that figure drop under 1 million over time as sanctions weigh on the nation’s economy.
BNP Paribas projects that U.S. oil prices will rise to an average of $66 by the end of the third quarter. The firm projects that Brent crude will hit an average of $73 in the months ahead.
But they could quickly go higher if England avoids a hard Brexit and/or the United States strikes a deal with China on trade.
That will be excellent news for oil producers whose bottom lines will strengthen from rising crude prices.
Especially this company, which is one of the best stocks to buy today…
The Top Stock Under $10 to Buy
The VQScore system says that it is time to purchase Callon Petroleum Co. (NYSE: CPE).
As we’ve noted, oil prices are poised to head much higher in 2019. Factors pushing crude higher include sanctions on Iran and Venezuela, production cuts by OPEC, increased trade deal optimism, and rising U.S. demand.
Callon Petroleum is an independent energy company that engages in the production of oil and gas in the Permian Basin in West Texas. Looking at the numbers, there is a lot to like about the Permian Basin and Callon stock…
According to The Wall Street Journal, the top energy players in the game are set to bolster their production in this region.
WSJ notes that Chevron will aim to double its Permian output in the next five years, while Exxon will increase its output to 1 million barrels per day by 2024.
With major American companies planning to expand shale production in that region, much needed pipeline infrastructure will follow.
And that’s great news for a company like Callon, which is already financially strong.
Callon has an F-score of 7, signaling financial strength and value in the stock (the top score is 9).
Also, the stock trades at an enterprise value to EBIT of 9.32, meaning it could be a takeover target for one of those larger producers listed above.
Finally, the stock trades at a price-to-tangible-book value of 0.7 – so the sum of the company’s parts is worth more than the market capitalization.
But the most important number that Callon offers our highest VQScore of 4.75. That puts it squarely in our “Buy Zone.”
We track every publicly traded company, but only the 1,500 most profitable businesses earn a VQScore. To get the score, we use key factors that find stocks capable of outperforming “average” returns.
And Callon Petroleum sits as one of the best value buys in the market right now. The stock traded at $7.40 per share after market close on March 6, and Wall Street sees significant upside for this stock.
The consensus of 11 analysts on TipRanks gives CPE shares a one-year price target of $11.50. That figure represents a potential upside over 52%.
But don’t be surprised if this stock doubles thanks to its booming production expectations in the year ahead…
The company recently announced plans to produce between 39.5 million to 41.5 million barrels of oil equivalent this year. That figure would imply production growth of 20% year over year.
This is probably why analysts at Imperial Capital set a price target at $15 per share – or 100.2% upside from Wednesday’s trading session.
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