This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

8 Ways to Play Energy Stocks in Risky Global Markets (Update 1)

Stocks in this article: SWN CHK HES APC PXD

4. Credit Suisse
Focus: finding the "go-to" natural gas stock, with a liquids tilt

For natural gas stock investors who expect a recovery in gas prices from near-decade lows but are weary of the murky outlook for Chesapeake Energy (CHK), Credit Suisse analyst Arun Jayaram suggests that Southwestern Energy (SWN) is a "go-to" stock when natural gas prices turn because of its strong balance sheet and its existing base of production in the Fayetteville and Marcellus shale's.

Jayaram, who upgraded Southwestern Energy from underperform to neutral on Wednesday concedes that the company is already richly valued compared to some embattled peers; however, he expects shale assets to support 8% production growth through 2015 amid a long-term rebound in gas prices.

"Recent sharp declines in conventional activity and more permanent shifts in producer economics that favor liquids plays could bring about a faster reset in the gas market than implied by the gas futures strip," notes Jayaram, who boosted his price target for Southwestern Energy to $29 from $25.

For those who want to play the energy sector but are weary of direct exposure to commodity prices, Credit Suisse's recent addition of Pennsylvania-based utility PPL Corporation (PPL) in its "Better than Bonds" portfolio may prove to be a defensive energy play worth watching. The basket was created in 2010 with the premise that bond investors may move into low-beta, high-yield stocks given low returns on Treasuries. Previously, Credit Suisse held Con Ed (ED) in the portfolio.

5. Deutsche Bank
Focus: natural gas stocks as a defensive trade

As drillers like Southwestern catch the interest of some, Carl Icahn's recent activist investment in Chesapeake Energy has boosted the natural gas sector's biggest 2012 stock story. In Wednesday trading, Chesapeake Energy rose over 5% on Bloomberg reports that the company is considering selling its minority stake in its Chesapeake Midstream Partners (CHKM) pipeline unit for $4 billion.

Now some are targeting natural gas producers as a way to defend against the possibility negative macroeconomic data continues to hit energy prices.

"We see the recent outperformance of natural gas stocks as a defensive trade within the group (vs. downside risks to oil)," writes Deutsche Bank oil and gas equity analyst Stephen Richardson in a Wednesday note to clients. Still, Richardson concedes its a risky proposition. "While we see tighter balances in 2013 and beyond for the commodity, we expect the stocks to remain volatile due to little support from earnings momentum even in a $4/mmbtu environment in 2013," he adds.

Although natural gas has been hit by an oversupply in the U.S. and a persistent inventory build, Richardson notes that a drop in natural gas drilling rigs may not cut inventories. "A massive step change in upstream operating efficiency has challenged the rigs to production relationship," he writes, citing calculations that although rigs are down 31% production declines have been "slow to materialize."

3 of 4

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,778.15 +421.28 2.43%
S&P 500 2,061.23 +48.34 2.40%
NASDAQ 4,748.3960 +104.0840 2.24%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs