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Goldman Sachs: These are the top 4 energy stocks to pick up before 2020

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  • The energy equities sector is set to bottom in 2020, according to a December note from Goldman Sachs.
  • That could set the stage for improved energy equity sentiment later in the year, Goldman Sachs analyst Brian Singer wrote.
  • Here are four energy exploration and production stocks that Goldman Sachs says investors should pick up before 2020.
  • Read more on Business Insider.

Energy equities are set to bottom in 2020, and that could set the stage for improved energy equity sentiment later in the year, according to a December note from Goldman Sachs.

“After three years of OPEC needing to reduce production to maintain inventory stability in 2017-19, we are shifting in 2021 to a multi-year period where OPEC will need to increase production to maintain inventory stability,” a group of analysts led by Brian Singer wrote.

A recession or non-compliance issue aside, “It is not clear incremental OPEC cuts will be needed post ones announced earlier this month to be enacted in 1Q20,” Singer wrote.

He continued: “While this is likely to drive a bottom in Energy equity sentiment in 2020, we do not believe the end of the downcycle will warrant unencumbered growth by all producers.”

Instead, Singer wrote that stock picking in 2020 will be driven by “expectations for four elements of sustainability.” Those elements include leverage, earnings, and asset base sustainability, as well as decarbonization of the industry.

Against that backdrop, there are four exploration and production stocks that Singer and the Goldman Sachs team see as good buys going into 2020, based on favorable growth versus peers at an attractive valuation.

Here are the top four stocks that Goldman Sachs highlighted in the energy sector:



1. EOG Resources

Wikmedia

Ticker: EOG

Goldman Sachs rating: Buy

Free cash flow yield estimate: 4%

Core inventory life estimate: 17

Oil growth estimate: 15%

Source: Goldman Sachs



2. Pioneer Natural Resources

Pioneer Natural Resources

Ticker: PXD

Goldman Sachs rating: Buy

Free cash flow yield estimate: 3%

Core inventory life estimate: 20

Oil growth estimate: 13%

Source: Goldman Sachs



3. Parsley Energy

Reuters/Brendan McDermid

Ticker: PE

Goldman Sachs rating: Buy

Free cash flow yield estimate: 6%

Core inventory life estimate: 13

Oil growth estimate: 9%-11%

Source: Goldman Sachs



4. Concho Resources

NYSE/Youtube

Ticker: CXD

Goldman Sachs rating: Buy

Free cash flow yield estimate: 3%

Core inventory life estimate: 18

Oil growth estimate: 13%

Source: Goldman Sachs


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