In physics, gravitation dictates that what goes up must come down. The stock market, however, is a bit less predictable. Stocks can follow the crowd, buck the market’s trend, or just mosey along.
This year, energy stocks are bringing up the bottom of the pack, underperforming the broader markets. However, it’s worth noting that what goes down can still come back up. In this regard, investment giant Goldman Sachs has been identifying energy stocks that are primed for a turnaround.
In a note authored by 5-star analyst Neil Mehta, the Goldman view is laid out clearly, presenting several reasons why energy stocks are weak this year, including: “1) higher than expected Russia oil supply, 2) concerns about industrial demand… [and] 3) lower natural gas prices…”
Mehta goes on to explain in more depth why a rebound is in the offing, saying, “While we recognize the environment is more challenging for Energy equities than the 2021/2022 recovery, we do believe there are attractive opportunities given valuation, capital returns and thematic tailwinds for many of the companies in our coverage…. For these stocks, we believe the risk-reward will improve as positive catalysts begin to materialize.”
Now, let’s take a closer look at some of the energy companies that Mehta and his colleague Umang Choudhary believe will realize gains on improved risk/reward. Here are details on two of them, along with the analysts’ comments.
Halliburton Company (HAL)
The first Goldman energy pick we’ll look at is Halliburton, one of the world’s largest oilfield services companies. Oilfield services play a vital role in the energy production chain, encompassing various technical and engineering functions. These companies provide the expertise needed to operate oil and gas wells, conduct horizontal drilling and fracking operations, maintain fluid pumps and pipelines, and safely decommission and plug non-productive wells — and that’s just a glimpse of their extensive responsibilities. Without companies like Halliburton, the oil and gas giants would face significant challenges…