A few top oil stocks were found on today's IBD Screen Of The Day, which focuses on stocks that funds are buying. Rising institutional interest in a company is typically a bullish indicator.
Northern Oil & Gas and Ranger Oil were both featured on the list and maintain strong recent fundamental and technical performance ratings. Additionally, media publisher RELX also made the list and is worth watching.
Analyzing Northern Oil & Gas
Mutual fund ownership for oil stock Northern Oil & Gas rose for the December-ended quarter. The number of funds owning the Minnesota-based firm rose to 283 from 242 in the previous quarter. Fund ownership has also risen for the past four consecutive quarters.
Most impressively, this metric made a big leap from the same period a year ago, when fund ownership totaled only 80 for the quarter ended December 2020.
Northern Oil & Gas is an unusual player in the shale space since it does not actually operate any wells. The firm essentially acts as an investor in the oil and gas wells operated by other companies. Northern Oil & Gas shares in the costs of drilling and developing wells with other companies in exchange for a percentage of the revenue.
The energy industry has spawned an impressive recovery following the devastation of the coronavirus pandemic. Northern Oil & Gas has also benefited from this recovery. In the most recent December-ended quarter, sales jumped 178% and profits came in at 84 cents a share, showing a rise of 65%. This well exceeds IBD's CAN SLIM requirements for top growth stocks.
Additionally, the firm is part of the U.S. oil and gas drilling and exploration group which ranks No. 2 of the 197 IBD industry groups. This shows market leadership and is a key component in finding top stocks to buy and watch.
Shares are currently forming the right side of a cup base with a 27.97 buy point. Shares are pulling back this week pretty substantially but are coming in to test support at the 10-week line. Investors should look to see if Northern Oil & Gas can successfully gain support at this level before initiating a position.
Northern Oil & Gas has outlined an ambitious dividend growth plan that aims to raise the dividend 20% annually until 2023.
Oil Stocks To Watch
Another oil stock to watch known as Ranger Oil is building a new base as well. The chart could be interpreted as a cup base with a 35.41 buy point, according to MarketSmith analysis. Shares are trading roughly 16% below this entry.
The oil stock has been holding above its 50-day moving average as it approaches the top of the consolidation. Shares have pulled back over 10% this week and are coming in to test the 10-week line.
Ranger Oil's relative strength line has been moving higher since the middle of December, alongside the stock price. The RS line compares a stock's performance with that of the S&P 500.
The company shows 293 mutual funds owned it in the December-ended quarter, up from 260 in the quarter prior. Ranger Oil is expected to produce stellar earnings growth in 2022, with EPS projected at $8.17, up from the $4.23 estimated in 2021.
Stocks To Buy And Watch: RELX
RELX, a media company that publishes science, medical, legal and business periodicals, is also among stocks with rising fund ownership. Shares are currently slightly below the 50-day line but are forming a shallow flat base with 32.81 buy point.
The media periodicals industry group has quietly been gaining strength in recent months and currently ranks No. 7 out of the 197 IBD industry groups. In the most recent December-ended quarter, RELX showed fund ownership of 66, up from 59 funds in the same quarter a year ago.
RELX is expected to report earnings on Thursday, Feb. 1o, which could catalyze a move higher or lower in the stock.
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