Best Energy ETFs to Buy Now for June 2022

Big Money is still flowing into energy. There are several ETF plays within energy, many of which contain powerhouse stocks. Inflows have been strong, so there could be some overextension at play and maybe a pullback. Still, the longer-term outlook remains strong.

Markets and Big Money in the Last 6 Months

My research firm, MAPsignals, measures Big Money investor activity. That includes institutions, pension funds, big individual investors, and so on. Our research shows Big Money moves markets.

We created the Big Money Index (BMI), which is a 25-day moving average of large-scale investor buy and sell activity. The BMI has been on a big downward trend since April. Generally, money has been flowing out of market, presumably into “safer” assets that have become more attractive of late. But buying is ticking up of late:

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On May 24, the BMI hit oversold territory. It stayed there for a couple days and buying has since pushed it higher, at least momentarily. The key takeaway is when the BMI hits oversold, forward-looking returns stretching from one to 24 months are positive, on average. An oversold BMI is a hugely bullish signal.

But in the face of doubt, investors have flocked to energy this year, making the traditionally defensive sector look appetizing for growth. Given these conditions, we’ve identified some energy ETFs we think have great long-term potential: FCG, FTXN, FXZ, PXE, and FFTY.

Long-term investors should look for ETFs (and their stocks), with great setups. Remember, ETFs are just baskets of stocks, so we need to look at them in detail. MAPsignals specializes in scoring more than 6,500 stocks daily. If I know which stocks compose the ETFs, I can apply stock scores to the ETFs. Then I can rank them all from strongest to weakest.

Let’s get to the five best energy ETF opportunities for June 2022.

First Trust Natural Gas ETF (FCG) Analysis

Natural gas is becoming more popular as a potential “bridge” energy source between heavy reliance on fossil fuels to a cleaner energy future. Big Money believes in it as it’s been buying, especially since October of last year, which always helps:

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FCG holds several big stocks. One example is Coterra Energy Inc. (CTRA), which has phenomenal one-year sales growth of 161.2% and a profit margin of 31.6%. It’s one of the biggest holdings in FCG and is becoming a Big Money magnet:

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First Trust Nasdaq Oil & Gas ETF (FTXN) Analysis

Thanks to the geopolitical situation right now, oil and gas are back. Consequently, prices for energy are up. That bodes well for energy ETFs with fundamentally sound stocks. The FTXN chart reflects the energy boom:

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One great stock FTXN holds is Marathon Oil Corporation (MRO). It has one-year sales growth of 80.9% and a profit margin of 16.9%. As you can see, Big Money has been buying MRO in chunks over the past year, with heavy buying starting in late summer 2021 and really ramping up this year:

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First Trust Materials AlphaDEX Fund (FXZ) Analysis

While not a pure energy fund, FXZ is squarely within the energy/industrials/materials mix and has rock-solid fundamentals. It’s been on an upward trend since last summer and saw Big Money action back in March:

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A fantastic stock within FXZ is Westlake Chemical Corporation (WLK), an international manufacturer and supplier of petrochemicals, polymers, and building products. It’s jumped since the new year, which isn’t surprising given its growing sales (one-year sales growth of 57.0%) and three-year EPS growth of 143.4%. WLK has been attracting lots of Big Money:

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Invesco Dynamic Energy Exploration & Production ETF (PXE) Analysis

As always with ETFs, fundamental strength within underlying assets is a high priority. PXE is loaded with great stocks. It’s been progressing well since last year, and jumped nearly 11% in the last month:

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A great stock within this ETF is Occidental Petroleum Corporation (OXY). Warren Buffett recently disclosed big buying in OXY. One of the best investors of all time buying in is a good sign. It’s had one-year sales growth of 51.5% and sports a profit margin of 10.7%. The Big Money has been scooping up OXY all year and the stock has more than doubled:

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Innovator IBD 50 ETF (FFTY) Analysis

Investors Business Daily releases an “innovator list” every year and this ETF tracks those names. While it’s not a dedicated energy ETF, but many of its top holdings right now are energy stocks. In fact, the top five holdings are all energy firms. It’s down right now, but that may prove to be a big bargain for long-term investors:

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One great stock in FFTY is Matador Resources Company (MTDR), an oil and gas exploration firm. It’s seen Big Money buying because MTDR is fundamentally strong – it has one-year sales growth of 117.7% and a profit margin of 31.4%. But it’s possibly overextended and may pull back:

Here’s a Big Money recap:

  • When Big Money buying heats up, stocks and ETFs tend to rise
  • Deep selling on great quality can be a phenomenal opportunity
  • Repeated buying usually means outsized gains

Bottom Line and Explanatory Video

FCG, FTXN, FXZ, PXE, and FFTY are my top energy ETFs for June 2022. While they’re not all pure energy plays, they all have sizeable stakes in energy companies and solid fundamentals. These picks can rise higher, in my opinion, largely because they each hold great stocks and energy is in demand.

To learn more about MAPsignals’ Big Money process please visit: www.mapsignals.com

Disclosure: the author holds no positions in FCG, FTXN, FXZ, PXE, FFTY, CTRA, MRO, WLK, OLK, or MTDR at the time of publication.

Contact:

https://mapsignals.com/contact/

Marathon Oil Rallies As WTI Oil Tries To Settle Above $120

Key Insights

  • Marathon Oil stock moves to new highs amid strong demand for oil-related equities. 
  • The stock is up by more than 90% year-to-date but stays cheap at just 7 forward P/E. 
  • Oil markets remain bullish, which could push Marathon Oil stock to higher levels. 

Marathon Oil Tests Multi-Year Highs

Shares of Marathon Oil gained strong upside momentum and moved to multi-year highs as traders rushed to buy oil stocks after WTI oil moved towards the $120 level.

Currently, Marathon Oil is trading at levels that were last seen back in 2014. It should be noted that all-time highs for the stock were reached in 2007.

The stock has performed extremely well in 2022 as analyst estimates kept moving higher at a robust pace. Currently, Marathon Oil is expected to report earnings of $4.81 per share in the current year and $4.29 per share in the next year so the stock is trading at roughly 7 forward P/E, which is cheap for the current market environment.

What’s Next For Marathon Oil Stock?

Marathon Oil stock will likely remain extremely sensitive to developments in the oil markets in the near term. While Marathon Oil is trading at an attractive 7 forward P/E, the stock may be hit by profit-taking if oil pulls back from current levels.

Traders who have invested in Marathon Oil stock at the start of this year have significant paper profits, so the desire to take some of these profits off the table should not be underestimated.

At the same time, current valuation levels remain attractive. Analyst estimates continue to move higher, serving as a material bullish catalyst for the stock. The start of the driving season, the end of lockdowns in China and new sanctions on Russian oil could serve as additional bullish catalysts for Marathon Oil stock.

To keep up with the latest earnings updates, visit our earnings calendar.

Will Soaring Energy Prices Help Marathon Oil?

Marathon Oil shares, which more than doubled last year, is expected to remain well supported, thanks to surging energy prices and a recovery in demand, but it is yet to reach the highs recorded in 2018.

In the fourth-quarter results, Marathon Oil reported quarterly adjusted earnings of $0.77 per share, beating the Wall Street consensus estimates of $0.55 cents per share. The U.S. shale producer said its revenue more than doubled to $1.80 billion from a year earlier. That too beat the market expectations of $1.55 billion.

In a $60/bbl WTI or higher price environment, the company targets returning a minimum of 40% of CFO to equity investors. During the fourth quarter, Marathon Oil returned over 70% of CFO to shareholders through a combination of share repurchases and base dividends, significantly exceeding its minimum 40% commitment, the company said.

“Reasons To Buy: The wells drilled by Marathon have extremely low oil price break-even costs and need oil prices of just $35 a barrel to be profitable,” noted ZACKS Research.

Marathon Oil stock traded 1.70% higher at $22.24. The stock rose over 35% so far this year after surging more than 146% in 2021.

Analyst Comments

Marathon’s stock has more than doubled year-over-year and was the second-best performer in the S&P 500 (behind shale peer Devon). The durability of the free cash windfall from higher pricing is partially dependent on macro-economic factors that lie beyond the reach of the individual U.S. E&Ps, but we think firms that keep spending to a minimum are making the right choice, as oil prices will likely subside to a more midcycle level in 2023,” noted Dave Meats, Director at Morningstar.

Marathon Oil Stock Price Forecast

Fourteen analysts who offered stock ratings for Marathon Oil in the last three months forecast the average price in 12 months of $25.00 with a high forecast of $31.00 and a low forecast of $20.00.

The average price target represents a 12.51% change from the last price of $22.22. Of those 14 analysts, 11 rated “Buy”, two rated “Hold”, while one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $20 with a high of $25 under a bull scenario and $10 under the worst-case scenario. The investment bank gave an “Equal-weight” rating on the oil company’s stock.

Several analysts have also updated their stock outlook. Piper Sandler raised the target price to $27 from $22. Raymond James lifted the price objective to $31 from $27. JPMorgan upped the target price to $24 from $23.

Technical analysis suggests it is good to buy as 100-day Moving Average and 100-200-day MACD Oscillator gives a strong buying opportunity.

Check out FX Empire’s earnings calendar

Marathon Oil’s Revenue to Nearly Double in Q4

Marathon Oil, an energy exploration and production company, is expected to report higher earnings and revenue in the fourth quarter, largely driven by surging energy prices and a recovery in demand.

The U.S. shale producer would report earnings per share of $0.52 per share, which represents year-over-year growth of over 530% from a loss of $0.12 per share seen in the same period a year ago. Marathon Oil would post revenue growth of over 86% to $1.55 billion from $830 million a year earlier.

Marathon’s robust operational metrics suggest strong long-term cash flows that should support higher price points for the shares. The wells drilled by Marathon have extremely low oil price breakeven costs and need oil prices of just $35 a barrel to be profitable,” noted analysts at ZACKS Research.

Marathon Oil stock traded 2.31% lower to 20.72 in pre-market trading on Tuesday. The stock rose over 29% so far this year after surging a massive 146% in 2021.

Analyst Comments

“Rapid progress on debt reduction accelerates cash return. Having achieved its ’21 debt reduction target of $1.4 B and $4 B absolute debt, Marathon Oil (MRO) is well-positioned to return a minimum of 40% of CFO to shareholders beginning in 4Q21,” noted Devin McDermott, Equity Analyst And Commodities Strategist at Morgan Stanley.

“In-line valuation. MRO’s 2022 EV/EBITDAX and FCF yield are trading in line with peers.”

Marathon Oil Stock Price Forecast

Thirteen analysts who offered stock ratings for Marathon Oil in the last three months forecast the average price in 12 months of $21.77 with a high forecast of $26.00 and a low forecast of $19.00.

The average price target represents a 2.98% change from the last price of $21.14. Of those 13 analysts, seven rated “Buy”, five rated “Hold”, while one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $20 with a high of $25 under a bull scenario and $10 under the worst-case scenario. The investment bank gave an “Equal-weight” rating on the oil company’s stock.

Several analysts have also updated their stock outlook. Susquehanna raised the stock price forecast to $22 from $18. Barclays lifted the target price to $20 from $18. Piper Sandler upped the price objective to $22 from $18.

Technical analysis suggests it is good to buy as 100-day Moving Average and 100-200-day MACD Oscillator shows a strong buying opportunity.

Check out FX Empire’s earnings calendar

Wall Street Week Ahead Earnings: Shopify, Baidu, Walmart, Deere and DraftKings in Focus

Investors will focus on December quarter earnings for stocks that are economically sensitive, which should show better profits than technology stocks. Increasing Treasury yields and risk aversion could hit the stock market hard over the coming months. In addition, investors will closely monitor the latest news on the rapidly spread Omicron coronavirus variant to see how it impacts earnings in 2022.

Earnings Calendar For The Week Of February 14

Monday (February 14)

TICKER COMPANY EPS FORECAST
AAP Advance Auto Parts $1.93
ALX Alexander’s $4.29
AMKR Amkor Technology $0.65
ANET Arista Networks $0.6
SRC Spirit Realty Capital $0.81
VNO Vornado Realty Trust $0.76
WEBR Weber $-0.02

Tuesday (February 15)

TICKER COMPANY EPS FORECAST
ABNB Airbnb $0.05
AKAM Akamai Technologies $1.14
DVN Devon Energy $1.24
MAR Marriott International $1.04
RPRX Royalty Pharma $0.79
VIAC ViacomCBS $0.37
WFG West Fraser Timber $3.51

 

Wednesday (February 16)

IN THE SPOTLIGHT: SHOPIFY, BAIDU

SHOPIFY: Canadian multinational e-commerce company is expected to report its fourth-quarter earnings of $0.62 per share, which represents a year-over-year decline of over 46% from $1.15 per share seen in the same period a year ago. But the e-commerce software company would post revenue growth of over 37% to $1.34 billion.

According to Barron’s report, Gary Robinson, investment manager at Baillie Gifford said that Shopify is miles ahead of its competitors in helping merchants all over the world sell their items. He added that the company’s revenue could rise sharply in the next five years.

BAIDU: The Chinese tech giant is expected to report its fourth-quarter earnings of $1.89 per share, which represents a year-over-year decline of nearly 40% from $3.08 per share seen in the same period a year ago.

However, Baidu Inc, a leader in the Chinese search industry in terms of user market share, would post revenue growth of about 9% to $5.04 billion. The company has beaten consensus earnings estimates in most of the quarters in the last two years, at least.

“We maintain a “Buy” rating for Baidu (BIDU) with a target price of RMB 165. Our target price is based on the forward P/E of 18.48x and forward P/S of 0.42x for FY22. Non-GAAP EPS of RMB 56.59 ($8.98) for FY22. This provides an upside potential of 15% over the CMP of RMB 143.80,” noted Shejal Ajmera is founder and head of research at CrispIdea.

“We decrease our estimate for revenue growth to 14.3% from 19% for FY21 due to China’s low GDP growth. We estimate revenue growth of 10% for FY22 and 12% for FY23. We estimate EPS of RMB 56.19 ($8.87) and RMB 56.59 ($8.93) for FY21 and FY22, respectively.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 16

TICKER COMPANY EPS FORECAST
AMAT Applied Materials $1.85
SAM Boston Beer $2.87
H Hyatt Hotels $-0.08
MGY Magnolia Oil & Gas $0.77
MRO Marathon Oil $0.52
NVDA Nvidia $1.0
TRIP TripAdvisor $-0.04

 

Thursday (February 17)

IN THE SPOTLIGHT: WALMART

Bentonville, Arkansas-based retailer Walmart is expected to report its fourth-quarter earnings of $1.49 per share, which represents year-over-year growth of over 7% from $1.39 per share seen in the same period a year ago.

The multinational retail corporation that operates a chain of hypermarkets would post revenue growth of nearly 1% to $150.91 billion. The company has beaten consensus earnings estimates in most of the quarters in the last two years, at least.

“Latest AlphaWise data shows Walmart+ membership continues to increase, with ~15m members total (~12% household penetration) & ~1m net members added in the past quarter. Overlap between Walmart+ & Prime remains high; we’ll monitor if this changes with a Prime fee hike coming,” noted Simeon Gutman, equity analyst at Morgan Stanley.

“We expect Walmart (WMT) to sustain recent momentum in its core business in F’22/F’23 and see a growing ability to balance longer-term investments with near-term returns. Our OW rating and $170 PT are underpinned by a preference for 1) quality players with scale and 2) defensive retailers as the market undergoes a mid-cycle transition.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 17

TICKER COMPANY EPS FORECAST
AN AutoNation $4.96
DBX Dropbox $0.2
ROKU Roku $0.01

 

Friday (February 18)

IN THE SPOTLIGHT: DEERE, DRAFTKINGS

DEERE: The world’s largest maker of farm equipment, is expected to report its fiscal first-quarter earnings of $2.28 per share, which represents a year-over-year decline of over 41% from $3.87 per share seen in the same period a year ago. The agricultural, construction and forestry equipment manufacturer would post revenue growth of about 0.5% to $8.09 billion.

“Higher input and freight costs to affect FY22 margins. We downgrade our rating to “Hold” from “Buy” for Deere & Co. and upgrade our TP to $406 for FY23. We derive TP based on non-GAAP EPS to $22.30 & $25.14 for FY22 & FY23, respectively and P/E of ~16.1x for FY23. This provides an upside potential of 8.6% from CMP of $373.79,” noted Shejal Ajmera, Head of Research at Crispidea.

“Following are the reasons for the above assumptions: 1) Strong demand in farm and construction equipment to aid topline; 2) Focus on automation to ensure long term growth and 3) Short term headwinds to affect profitability.”

DRAFTKINGS: The U.S.-focused gambling operator is expected to report its fourth-quarter loss of $0.78 per share, a dime greater than the loss of $0.68 it recorded in the same period a year ago. But the revenue would grow more than 36% to $439.5 million.

“We forecast legal US sports betting & iGaming to increase from <$1.5B in 2019 to $20.6B in 2025 as more states legalize and spend per capita rises. Forecast DKNG to maintain top tier share, 24% in OSB and 21% in iGaming in 2025. Investors question LT profits, but other developed markets have shown 25-30%+ profits for operators at maturity, esp. those with a customer acq. advantage similar to DKNG’s with its DFS database,” noted Thomas Allen, equity analyst at Morgan Stanley.

“Current valuation of 9x 2025e EBITDA does not reflect long-term margins or growth. Upside drivers include signs of profits in mature states, new product innovation and higher market share. Downside risks include higher losses, greater competition and lagging product innovation.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 18

TICKER COMPANY EPS FORECAST
ABR Arbor Realty Trust $0.39
B Barnes Group $0.49
BLMN Bloomin’ Brands $0.52
DE Deere & Co. $2.28

 

Marathon Oil Posts Fourth Straight Loss in Q3 as COVID-19 Pandemic Hit Demand

Marathon Oil, an energy exploration and production company, reported a loss for the fourth consecutive time in the third quarter as the ongoing COVID-19 pandemic hit demand for fuel.

U.S. shale producer reported a third-quarter 2020 net loss of $317 million, or $0.40 per diluted share. The adjusted net loss was $219 million, or $0.28 per diluted share. Net operating cash flow was $345 million, or $352 million before changes in working capital, the company said.

Marathon’s third-quarter total company oil-equivalent production declined to 370,000 net barrels of oil equivalent per day (boed) from 426,000 boepd a year ago; full-year oil-equivalent guidance raised by 5,000 net boed at the midpoint.

Marathon Oil shares closed 3.14% higher at $4.27 on Wednesday; however, the stock is down about 70% so far this year.

Executive Comments

“While we continue to manage through commodity price volatility and the ongoing COVID-19 pandemic, third quarter represented an inflection point in what has been a transitional year, highlighted by $180 million of free cash flow generation on strong execution across all elements of our business,” said Chairman, President, and CEO Lee Tillman. “We believe our unwavering focus on how we allocate capital, how we manage our cost structure, and how we execute is clearly paying off. Third-quarter free cash flow more than funded the reinstatement of our base dividend and a gross debt reduction of $100 million, consistent with our objective to return capital to shareholders and enhance our balance sheet. We are well-positioned to continue doing both in the current environment.”

“We have also committed to a transparent capital allocation framework that provides visibility to compelling free cash flow generation and the dedication of meaningful cash flow to investor-friendly purposes,” continued Tillman. “Beyond just a commitment, we have a unique track record of delivery on this framework since 2018. We believe we have successfully positioned our company for industry-leading capital efficiency and sustainable free cash flow generation at lower and more volatile mid-cycle pricing.”

Marathon Oil Stock Price Forecast

Twelve equity analysts forecast the average price in 12 months at $5.51 with a high forecast of $9.00 and a low forecast of $4.00. The average price target represents a 29.04% increase from the last price of $4.27. From those 12 analysts, one rated “Buy”, ten rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $4.5 with a high of $11 under a bull-case scenario and $2 under the worst-case scenario. The firm currently has an “Underweight” rating on the shale producer’s stock. Barclays lowered their price target to $5.5 from $6.5 and Susquehanna cuts stock price forecast to $4.5 from $5.

Several other analysts have also recently commented on the stock. Simmons energy downgraded the price target to $5 from $7 and UBS lowered the target price to $5 from $6. Marathon Oil had its target price reduced by equities research analysts at Citigroup to $4.75 from $6.50. The brokerage currently has a “neutral” rating on the oil and gas producer’s stock. At last, Northland Securities initiated coverage on Marathon Oil in a report on Monday, September 14th. They issued a “market perform” rating and a $5.40 price objective on the stock.

Analyst Comments

“Outlook relatively challenged. The combination of more challenged core inventory depth than peers, exposure to higher cost (and lower realization) basins, exposure to Dakota Access Pipeline (DAPL) uncertainty, and international headwinds create a challenging backdrop. Moderate discount warranted. Marathon Oil is trading at a discount to NAm peers, which we believe is warranted given its shorter “core” inventory life and Bakken exposure,” said Devin McDermott, equity and commodities strategist at Morgan Stanley.

Check out FX Empire’s earnings calendar