Finding the right stock is the key to a successful investment, but it’s never as easy as it sounds. The answer to the question, which stock should I buy? it is not secret, but hidden, in the avalanche of data that the markets produce. What is needed is some clear signal to cut through the noise and indicate the right stocks for the season.
The volume of data, and the sheer inability to analyze it all in real time, creates a formidable barrier to successful stock picking – but Wall Street analysts have that piece under control, which turns the question into a much more manageable one: which analysts do I follow? ? The quick answer is, follow the best analyst.
That brings us to Mizuho Securities’ Vincent Lovaglio, who currently holds TipRanks’ top spot among more than 7,900 professional stock analysts. His top ranking is based on consistent results: a 91% success rate on his stock picks and an average return of 46.6%.
In recent weeks, Lovaglio has picked two stocks he believes are poised for gains. According to TipRanks data, these are Strong Buy stocks with double-digit upside potential. Lovaglio sees them gaining well over 30% in the coming months. Here are the details.
EOG Resources (EOG)
We’ll start with EOG Resources, a hydrocarbon exploration and production energy company with operations in some of the richest oil and gas fields in the US. EOG’s primary operating region is in Texas-Louisiana-Oklahoma-New Mexico, where it has operations in the Eagle Ford Shale, Permian Basin, Anadarko Basin and Barnett Shale, as well as Colorado’s DJ Basin, Wyoming’s Powder River and the Williston Basin of Montana-North Dakota.
These diverse activities generated total production of 920.7 MBoed for 2Q22, well above guidance (895.7 MBoed) and year-ago production (828 MBoed). Total revenue for the quarter was $7.4 billion, with adjusted net income of $1.6 billion, or $2.74 per adjusted share. The company reported $3 billion in cash and liquid assets and $5.09 billion in total debt.
EOG’s revenue has grown steadily over the past two years, and the company has benefited from both a return to normal operations and rising oil and gas prices.
In coverage of this stock, lead analyst Lovaglio writes: “We like that the company has an opportunity to diversify on cost execution, with oil production growth largely on hold for now. We also favor the company’s increasing connection of its natural gas volumes to international markets through deals with Cheniere, which provides potentially high margin for its Dorado dry gas position. Additionally, in the company’s 2Q22 update, it announced initial success in the more oil-prone northern acreage in the Powder River Basin…we believe such updates reflect EOG’s higher ability to replenish organic reserves and the benefit of investing relatively more at the bottom of the cycle in exploratory/appraisal drilling than peers.”
Unsurprisingly, Lovaglio gives EOG stock a Buy rating, and the $167 price target implies ~37% one-year upside potential for the stock. (To follow Lovaglio’s history, Click here)
Overall, this energy stock has 14 recent analyst ratings, which include 11 buys versus just 3 holds, for a strong buy consensus. Shares are priced at $121.54 and the average price target of $150 gives a one-year upside of 23%. (See EOG stock prediction on TipRanks)
Diamondback Energy (FANG)
Next up is another energy stock, Diamondback. This $24 billion hydrocarbon producer operates in Texas’ Permian Basin, where its 2021 production averaged 375,000 barrels of oil equivalent per day. This has increased to 380,500 bpd in 2Q12, and the company’s stock has clearly benefited. FANG stocks are up 30% so far this year – well above the negative results of all the major indexes.
Additionally, in the second quarter, cash flow from operations reached $1.7 billion and free cash flow reached $1.3 billion. The company has a strong commitment to returning capital to shareholders and returned $837 million to shareholders in the second quarter, both through dividends and share repurchases. The company’s basic dividend is 75 cents per common share, or $3 on an annualized basis, and FANG paid a variable dividend in the quarter of $2.30 per share, for a total payout of $3.05. Taking the base and variable div together, the payout yields a high 9%.
Lovaglio was impressed by Diamondback’s capital return policy, noting that it provides a steady stream of income for investors. In his note on the stock, he writes: “FANG had announced an increase in its cash back framework to a 75% free cash flow payout at the end of June and followed that announcement with a $3.05/sh dividend along with a $2 .0 billion company repurchase authorization at $4.0 billion (~18% of market cap). The company also announced that it had repurchased 2.4 million shares in the second quarter for $303 million and had already bought 1.8 million shares in the third quarter for $200 million. FANG differentiates itself from its peers by driving costs and returns. A significant repurchase authorization reinforces this thesis.”
Based on the above, Lovaglio rates the stock a Buy and has a price target of $203 suggesting a 51% upside potential for the stock over the next year. (To follow Lovaglio’s history, Click here)
Diamondback’s 16 recent analyst reviews include 15 buys that greatly overweight the individual Hold on the stock. FANG shares are currently priced at $134.01 and have an average price target of $178.69, for a 33% upside potential over the next 12 months. (See Diamondback Stock Prediction at TipRanks)
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Disclaimer: The views expressed in this article are solely those of the selected analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.