2 Stocks Prompting Great Expectations (Correct)

CEO Paul Davis owns nearly 140,000 shares valued at around $7.14 million but that's chump change compared to Goldman Sachs (GS), which owns a whopping 2.91 million shares representing nearly 10% of the outstanding shares of CSTR. It appears the "smart money" is betting on its future success.

What's fascinating to me is the current short interest as a percentage of the float for CSTR is extremely high at 43.3%. As TheStreet's Senior Contributor Roberto Pendone recently wrote, "That means that out of the 27.36 million shares in the tradable float, 12.9 million shares are sold short by the bears. This is a heavily shorted stock with a low tradable float. Any bullish earnings news could easily spark a monster short-squeeze for shares of CSTR post-earnings."

I wholeheartedly concur.

Looking at a five-year chart of CSTR we can establish a pattern, a trajectory, and its operating earnings yield that is congruent and promising.

CSTR data by YCharts

If the short squeeze in CSTR doesn't materialize after the earnings release and the ensuing conference call, look for shares to possibly re-test support at just below $49 a share.

If you don't want to take any chances, do what I did. Buy half a position now and half after earnings is released and the stock price breaks out of its recent trading range between $46.83 and $54.16 on heavier than average volume.

Another stock poised to benefit from higher energy prices and deep-water drilling technologies is Ensco (ESV) the London-based company that owns and operates an offshore drilling rig fleet of approximately 77 rigs, including seven drill ships, 13 dynamically positioned semisubmersible rigs, seven moored semisubmersible rigs, 49 jack up rigs, and one barge rig used to drill and complete oil and natural gas wells.

ESV reveals its latest quarterly earnings results on Monday, Feb. 18, so potential investors have some time to evaluate it. The company's drilling rigs are located in Brazil, Europe and the Mediterranean region, the Middle East and Africa region, and the Asia Pacific rim region. It serves government-owned and independent oil and gas companies as well as various independent operators.

From a fundamental perspective ESV is trading for less than nine times forward and one-year earnings, and has a Price-to-Earnings-to-Growth (PEG, five-year expected) ratio of an extremely undervalued 0.40. It offers investors a reasonable 2.3% dividend representing a sustainable payout ratio of only 29%.

If ESV were to offer positive forward guidance and/or increase the dividend, it wouldn't surprise this analyst to see a 10% pop in the price-per-share within six months. The analysts' consensus estimate on EPS quarterly year-over-year growth is for a 24% increase to $1.29 a share. Revenue growth estimates for the latest quarter is for an increase of 9% to $1.09 billion. There's room for upside surprises here!

It's been almost five years since ESV was above $80 a share, as the chart below shows us. Yet, the analysts' consensus one-year estimate for the shares of ESV is a little above $68. With the revenue growth rate also seen in the chart, this share price growth estimate seems quite conservative.

ESV data by YCharts

As the company says about itself on its savvy Web site:

Ensco plc brings energy to the world as a global provider of offshore drilling services to the petroleum industry. For 25 years, we have focused on operating safely and exceeding customer expectations.

We are the industry leader in customer satisfaction, ranking first again with top honors for 2011 in 13 of 17 categories in an independent industry survey. Operating one of the world's newest ultra-deepwater fleets and largest fleets of active premium jackups, we have a major presence in the most strategic offshore basins across six continents.

I'm convinced enough to be a shareholder. If the company has good news and good guidance on Monday I plan on buying more shares, especially if shares settle back a bit before moving higher on increased volume.

While investors hold shares of ESV they'll get a higher yield than those who hold 10-year U.S. Treasuries, and the upside potential appears to be much greater than the downside risk.

At the time of publication the author had positions in CSTR and ESV.

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This article was written by an independent contributor, separate from TheStreet's regular news coverage.

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