The US economy did it again! Recession fears waned as the US economy surprised investors with a 2.4% growth rate for the period April-June. This continued flow of positive data has pushed markets up even further. Even with the Fed’s rate increases and the signal of potentially adding two more, the Fed will still decide their next steps based on the “totality of incoming data.” This has made the market price the possibility of lesser rate hikes and pushed stocks higher.
Now the next question is, which sectors are going to move next? With the tech sector constantly leading the S&P500 index higher, some might think that trading in tech might be too late. If you believe the same thing, your next question should be, which sector has started to recover? If we look at the QTD performance of each sector index in the S&P500, the current leader is the energy sector, with a -0.30% QTD performance - rapidly recovering against its -2.84% performance YTD.
Looking at the sector index chart, we see that the index created a bottom for the year, then retested the support to bounce back after the short consolidation. It’s on its way to its near-term resistance at the 670 mark. Once the price breaks, we may be in for another bullish run to the 720 area.
But how should you take part in the potential rally? Since we want to ride along the sector's recovery, we should be riding the fastest horse to get to the top. The best way to do that is to look at the outperformers. Let’s look at 3 of the energy stocks that are currently leading the sector right now.
NexTier Oilfied Solutions Inc. (NEX)
NexTier Oilfield Solutions Inc. is a land oilfield service company that offers well completion and production services for land basins in the U.S. Its operations cater to two services:
- Completion Services
- Well Construction and Intervention Services
These services range from hydraulic fracturing, completion support, wireline, and pumping services to research and technology with its Completion services operations. On the other hand, NexTier’s Well construction and intervention services offer cementing work that includes annulus isolation and hydraulic seal. The company has adopted sustainable practices to support its customers' sustainability goals.
Analyst Ratings
Analysts rate NEX as a “Moderate buy” based on 6 Strong buys, 2 Holds, and 1 Moderate sell recommendation from analysts. The mean target is $12.14, and the high price target is $16.00, with an upside of 38.17%.
Helix Energy Solutions Group (HLX)
Helix Energy Solutions Group, Inc. is an international energy services company that offers the offshore energy industry specialty services that cater to 4 categorized segments:
- Well Intervention
- Robotics
- Shallow Water Abandonment
- Production Facilities
Helix’s services enable its customers' offshore wells access with its well intervention operations, seabed clearance, and trenching that includes IRM (inspection, repair, and maintenance) with its robotics segment, offshore oilfield reclamation, and project management with its shallow water abandonment operations and, Helix Producer I (the HP I) and Helix Fast Response System (the HFRS) services with its production facilities.
Analyst Ratings
Analysts rate HEX as a “Moderate Buy” based on 4 Strong buys and 1 Moderate sell recommendation. The mean target is $10.00, with a high target of $13.00, a potential upside of 38.29%.
Helmerich & Payne Inc. (HP)
Helmerich & Payne, Inc. is a drilling solutions and technologies provider for oil and gas exploration and production. HP’s drilling rigs are designed, fabricated, and operated globally in conventional and unconventional plays. Helmerich & Payne operates in 3 segments:
- North America Solutions
- International Solutions
- Offshore Gulf of Mexico
Each segment focuses on their respective core markets. For example, North America Solutions primarily operates in Texas and on-demand operations from other states(i.e., Colorado, North Dakota, etc.). At the same time, Offshore Gulf of Mexico operates in the Gulf of Mexico’s U.S. federal waters and Louisiana, and international solutions operate in Bahrain, U.A.E, Argentina, and Columbia.
Analyst Ratings
Analysts rate HP as a "Moderate Buy” based on analysts' 7 Strong Buys, 5 Holds, and 2 Strong sell recommendations. The mean target price is $43.85, and the high target is $56.00, with an upside of 25.44%.
Final Thoughts
Outperformance has been one of the familiar drivers for traders to “join in on the action” for most trades; it is still imperative not to focus on it as a sole basis for making investment decisions. Industries like the energy sector are highly susceptible to global prices of commodities, and investors willing to trade or invest in these companies must actively monitor their developments. It’s always better to be aware than be blindsided by market-moving events.
On the date of publication, Rick Orford did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
