Last week, Wall Street analyst Jeremy McCrea spoke at TipRanks’ first Live Analyst Award Event. McCrea, a Raymond James analyst, earned top-performing status on TipRanks in 2021, thanks to his 81% success rate with a 20.6% average return per recommendation over a three-month period. He gave 59 different ratings in that time, all to stocks in the Energy sector.
At the awards event, McCrea emphasized his belief in the rising strength of energy stocks. Historically, the price of energy rises in tandem with inflation. That’s because oil is used in the production of millions of consumer goods. When setting prices of their goods, manufacturers factor in their costs of raw materials and production, so higher oil prices are sent along to the everyday consumer. The pileup of higher prices across a range of products leads to rising inflation.
In the past year, inflation in the U.S. rose 7%, the fastest pace we’ve seen since 1982. Although that’s difficult news to swallow, savvy investors can try to catch the silver lining by sinking money into oil stocks. As McCrea said, “Energy is doing well, and we’re seeing more investors come into energy because of that inflation…I think 2022 exactly is setting up to be another great year for energy.”
The analyst stands behind his optimism about the growth of the sector this year: in the past week, he gave 16 ratings on energy companies, 14 of which were Buy ratings. McCrea said he focuses on companies that show promise of multiple expansion in the future, and are engaged in something new and cutting edge that points to growth potential.
Here are three of his most recent stock picks:
Obsidian Energy (OBELF) (TSE:OBE)
Obsidian Energy is an oil and gas production company that is also involved in acquiring, exploring, developing and holding interests in petroleum and natural gas properties. Headquartered in Calgary, Canada, Obsidian has been around since 1979.
OBELF has received only one analyst rating in the past three months: McCrea reiterated a Buy rating on the stock yesterday, with a $7.12 price target, implying a 9.9% upside. Despite the paucity of analyst interest in the stock, OBELF earns a “Perfect 10” according to TipRanks’ Smart Score, indicating it has a good chance of outperforming the market.
Moreover, Obsidian’s stock price has risen by 644.8% over the past year, and has shown significant growth of more than 50% since the start of 2022. Its earnings have risen year-over-year in the past six quarters, as well.
Birchcliff Energy (BIREF) (TSE:BIR)
Birchcliff Energy Ltd. is an intermediate oil and natural gas company that engages in the exploration, development, and production of natural gas, crude oil, and natural gas liquids (NGLs). This Calgary, Canada-based company was established in 2004.
McCrea joins a chorus of voices that are positive about BIREF stock. In the past three months, the stock has garnered 6 Buy ratings and only 1 Hold rating. Last week, McCrea reiterated a Buy rating, setting a price target of $7.91, implying a 65.8% upside.
Overall, BIREF boasts a Strong Buy rating and a price target of $7.26, with a 52.1% upside. Furthermore, it has a “Perfect 10” Smart Score, showing that BIREF stock is likely to outperform the market.
Birchcliff’s earnings have risen year-over-year for the past five quarters, and are predicted to grow year-over-year again in the to-be-reported quarter. The stock has risen nearly 200% in the past year.
Baytex Energy (BTEGF) (TSE:BTE)
Baytex Energy Corp. is an oil and gas exploration and production company that engages in the acquisition, development and production of crude oil and natural gas. Also a Calgary, Canada company, Baytex was founded in 2010.
Out of the eight analyst ratings given to Baytex in the past three months, McCrea’s stands out as the lone Buy rating; all the rest are Holds. McCrea reiterated his Buy rating on BTEGF stock last week, setting a price target of $5.14, implying a 45.7% upside.
Although most analysts are not bullish on the stock, BTEGF has a Smart Score of 9, showing that it is likely to outperform the market. The stock rose by 460.3% year-over-year, and has already gained close to 11% in 2022. Additionally, its earnings have risen year-over-year in the past four quarters, and are predicted to rise year-over-year again in the coming quarter.
Conclusion
According to many experts, the correlation between inflation and oil/energy prices is no longer as strong as it was in the 1970’s. Nonetheless, historical records show that time and again, the two go hand in hand.
All eyes are on the Fed to see whether it can tamp down inflation. However, as long as it continues to rise, there’s a good chance that energy prices will rise as well. That truism, together with rising demand and the predictions of top-performing analyst McCrea, make energy stocks an investment worth considering.
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