This report is not a personal recommendation and does not take into account your personal circumstances or appetite for risk.
Exciting news out of Vienna for energy equities, with announcements from OPEC sending Brent crude over $75/barrel. Naturally, traders are rushing to grab a bit of BP and Shell, but they aren’t the only shares benefiting. We’ve discovered several other energy names with exciting potential.
Now, don’t get me wrong, no self-respecting energy investor should be ignoring the big boys, after all, the dynamic duo of BP and RDSB makes up a whopping 10% of the UK 100 (£209B in combined market cap). But a rising tide lifts all ships, and the oil supermajors aren’t the only ones worth a close look.
I wouldn’t be so bold as to say that with everyone and their mum rushing to invest in BP/RDSB, there are more exciting tradable opportunities to be found among smaller oil & gas players.
For one thing, smaller players can often be more volatile. Have a gander at a stock like Premier Oil. At £853M in market cap, it is a minnow compared to BP, but it has outperformed the giant shark both this week (+3.5% vs. -1.4%), in the last 3 months (+65% vs +22%) and in the past year (+163% vs +26%).
And it’s not just oil producers that benefit from OPEC news and crude oil rally. Other companies that deserve a second look are oil services companies that provide engineering support for the oil drillers, thus benefiting from a higher demand for black gold.
These are companies like Petrofac, Hunting and John Wood Group. Petrofac has been on an uptrend since February this year (+16% in the last 6 months), but has recently come down from year highs, bouncing off 3-month support at 545p.
Today’s OPEC news and subsequent oil rally could open the way for Petrofac shares to rise back to May highs and resume the uptrend. Even with the recent fall from highs, Petrofac has brought better historical returns to investors who bought the stock 1 year ago (+36.8% vs +29% for Royal Dutch Shell).
There is no guarantee that these gains will continue, of course, but if oil keeps going up, both big and small oil players could benefit. An innovative trader, therefore, would be looking for tradable opportunities to appear when important macro news hit the wires, or when some of these lesser known companies release quarterly results.
For example, did you know that both Tullow Oil (+21% in the last 3 months, by the way), Hunting and John Wood Group are reporting results next week? Could be an interesting trading opportunity, if you play your cards right.
Doesn’t matter if the trade is Long or Short, what matters is being prepared: reading broker analysis, following the direction of the oil price and looking at the charts to find good support and resistance levels.
Sounds too complicated? Not if you have an investment support structure like Accendo Markets that can help you take advantage of such opportunities. If this sounds interesting, get in touch with me by signing up for our Research and Trade ideas.
Joe Nguyen, Trader at Accendo Markets, 22 June 2018
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