The U.S. is in the midst of an oil and natural gas production boom.
In fact, many predict U.S. energy independence by 2020.
What’s more, many of the producers are small firms with explosive
growth prospects that didn’t even exist 10 years ago.
Most are operating in the oil-rich shale formations in North Dakota
and in Texas. Here’s how you can use the user-friendly FINVIZ
stock screener to find these fast growing
oil and gas exploration and production plays.
From the FINVIZ home page (http://finviz.com),
select “Screener.” FINVIZ uses “filters” to isolate stocks of
interest. Select “All” on the Filters menu to see the available
filters. You can access each filter from the corresponding dropdown
menu. Here are the details.
Shale PlayUniverse
We’ll start by defining the universe of acceptable candidates. We’ll
do that by isolating independent oil and gas exploration and
production stocks, and then use market capitalization (company size)
to limit the field to relatively small firms. Then we’ll limit our
universe to U.S.-based stocks, because in terms of production
growth, the U.S. is where all the action is.
Using the Sector, and Industry filters, specify Basic Materials, and
Independent Oil & Gas respectively. Then, use the market-cap filter
to specify maximum $10 billion. If you’re not familiar with the
term, market-cap is how much you’d have to shell out to buy all of a
firm’s shares. Finally, use the Country filter to specify USA.
Fastest Growers
While most established oil and gas firms grow sales around 5% to 10%
annually, we need much faster growers. We’ll use the “Sales Growth
(quarter over quarter)” filter to find them by requiring “over 30%.”
That means that for passing stocks, the most recent quarter’s sales
must have been a whopping 30% higher than the year-ago quarter.
However, one quarter isn’t enough. We need to confirm that those
sizzling growth rates are likely to continue. Since, FINVIZ doesn’t
let us screen based on sales growth forecasts, we’ll use analyst
per-share earnings (EPS) growth forecasts instead. Require “over
30%” for both EPS Growth Next Year and EPS Growth Next Five Years
(average annual 5-year growth).
Work Smarter
Institutional investors (mutual funds, pension plans, etc.) hire
squads of analysts to scrutinize financial statements. So, instead
of digging out our calculators and donning green eyeshades, we can
piggyback on their efforts by limiting our picks to stocks that
these big players hold. Institutional ownership is that percentage
of outstanding shares held by institutional investors. Anything over
30% signals support from these wired-in players. Require “over 30%”
for Institutional Ownership.
Stick With Winners
Usually, stocks that have already outperformed the market are your
best bets. You can see how a stock has performed by comparing its
share price to its average closing price (simple moving average, or
SMA) over a specified period. Stocks trading above their moving
average are in uptrends, which is what we want. We’ll use the 50-day
SMA to gauge short-term trends and the 200-day SMA to measure
longer-term activity. Specify “price above SMA” for both the 50-Day
and 200-Day simple moving averages.
Cheap stocks get that way because savvy investors see problems
ahead. Use the (recent) price filter to avoid those risky bets by
specifying “over $10.”
Candidates
My screen turned up four candidates;
• Athlon Energy (ATHL),
founded in 2010, Athlon operates primarily in the Permian Basin area
of Texas.
• Bonanza Creek Energy (BCEI), founded in
2010, Bonanza operates in the Rocky Mountains and in southern
Arkansas.
• Diamondback Energy (FANG), founded in
2007, Diamondback also operates in the Permian Basin.
• Triangle Petroleum (TPLM), incorporated
in 2003, Triangle operates in the Bakken Shale and other formations
in North Dakota and Montana.
Here's a
link to the
screen so that you can see which stocks it's turning up today.
As always, consider the screen results to be research candidates,
not a buy list. The more you know about your stocks, the better your
results.
published 7/18/14
