Last month was a good one for U.S. equities. The S&P 500 was up nearly 11%, while the Dow and the Nasdaq gained about 11.8% each. In particular, the S&P 500 — regarded as one of the finest reflections of the stock market as a whole — saw its best trading month since April and the best November in its history.
While no sector was down for the month, it was the
energy
space that topped the S&P standings in November with a gain of almost 30%.One of the major themes of the month was rising oil prices on the back of vaccine-related optimism, which had a direct bearing on energy stocks.It then came as no surprise that shares of oil-related companies were some of the biggest beneficiaries.
As a matter of fact, the top five gainers of the S&P 500 in November were all energy firms —
Occidental Petroleum
OXY
,
Devon Energy
DVN
,
Apache
APA
,
Diamondback Energy
FANG
and
TechnipFMC
FTI
.
Here’s a brief summary of the five best-performing S&P 500 stocks of last month:
Occidental Petroleum:
Founded in 1920, Houston, TX-based Occidental Petroleum is an integrated oil and gas company, with significant exploration and production exposure. The company is also a producer of a variety of basic chemicals, petrochemicals, polymers and specialty chemicals.
Occidental recently reported third-quarter 2020 loss of 84 cents per share, wider than the Zacks Consensus Estimate of a loss of 70 cents. The company had recorded earnings of 11 cents per share in the prior-year quarter. Lower contribution from all segments led to the underperformance.
While Occidental shares were up 72.6% in November, the Zacks Rank #4 (Sell) company is unlikely to gain similar traction in the near-to-medium term as it is struggling with a massive long-term debt of $36 billion and repercussions from the cancellation of the African asset divestment deal.
Devon Energy:
The upstream energy company’s oil and gas operations are mainly concentrated in the onshore areas of North America, primarily in the United States. In September, Devon Energy decided to merge with
WPX Energy
WPX
in a bid to strengthen its position in the premier unconventional Permian Basin play.
In the last reported quarter, Devon Energy reported adjusted loss per share of 4 cents, narrower than the Zacks Consensus Estimate of a loss of 8 cents. The outperformance came due to higher-than-expected production numbers.
The Zacks Rank #3 (Hold) stock was the second-best performer in the S&P 500 Index, with shares appreciating 56.7% in November. Devon’s cost management, divestiture of its Canadian assets and completion of the Barnett Shale gas assets sale will allow it to focus on its holdings in four high-quality oil-rich U.S. basins. However, the volatile commodity prices and the way it will trade in the future could have a significant impact on the business of the company.
You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
.
Apache:
Apache is one of the world’s leading independent energy companies engaged in the exploration, development and production of natural gas, crude oil and natural gas liquids. Its acreage in Suriname — off the north coast of South America — and the Permian Basin are the company’s long-term production growth drivers.
Apache’s third-quarter bottom line came in above expectations, led by higher-than-anticipated production volumes. Precisely, the average daily output came in at 445,241 barrels of oil-equivalent per day (BOE/d), beating the Zacks Consensus Estimate of 424,000 BOE/d.
This Zacks Rank #3 stock jumped 55.3% in November. While Apache appears well positioned going forward, its debt to capitalization in excess of 100% restricts its financial flexibility and growth.
Diamondback Energy:
Diamondback Energy focuses on growth through a combination of acquisitions & active drilling in the lucrative Permian Basin. Its activities are concentrated in the Wolfcamp, Spraberry, Clearfork, Bone Spring, and Cline formations.
Diamondback Energy delivered strong third-quarter 2020 earnings as production of oil and natural gas improved marginally from the year-ago quarter and beat the Zacks Consensus Estimate.
The Permian pure play, carrying a Zacks Rank #3, saw its stock surge 53.9% last month. Apart from being one of the top players in the most prolific basin in the United States, Diamondback’s substantial ownership interest in its infrastructure spin-off Rattler Midstream provides it with a steady and growing revenue stream. But the company’s oil production is likely to suffer in the next few quarters on scaled-down activity thereby limiting share price gains.
TechnipFMC:
TechnipFMC is a leading manufacturer and supplier of products, services and fully integrated technology solutions for the energy industry.The company strives to enhance the performance of its oil and gas clients by bringing together the scope and know-how to transform the project economics.
In the last reported quarter, TechnipFMC’s earnings missed due to weak revenue contribution from the Surface Technologies unit.The company’s backlog too decreased in the same period. The metric stood at $19.6 billion, declining 18.5% from the year-ago quarter.
TechnipFMC rallied 50.3% in November. However, the #4 Ranked oilfield service provider’s near-term stock price appreciation is likely to be under pressure as massive capital expenditure curtailments by the upstream players dries up contract and eats into its backlog.
Zacks Names “Single Best Pick to Double”
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
You know this company from its past glory days, but few would expect that it’s poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
