U.S. Oil Boom Is In Full Swing, And Funds Are Buying These 3 Oil Stocks With Short Covering

Back in November, the International Energy Agency released its 2012 World Energy Outlook report, which states that the U.S. is on track to becoming the world’s largest oil producer around 2020. Last year’s data lends some credence to this stance. According to BP’s (BP) Statistical Review of World Energy, crude-oil production increased by an unprecedented 1 million barrels a day in 2012. The growth, driven by technological advances such as hydraulic fracturing and horizontal drilling, is the biggest in U.S. and world history.

Investing Ideas

For this screen, we deferred to the market and looked for oil stocks with bullish sentiment from investors. To begin, we constructed a universe of oil stocks comprised of companies involved with independent oil production, oil drilling and exploration, oil equipment and services, oil pipelines, as well as oil refining and marketing.

We screened that group for stocks with significant net institutional purchases over the last quarter comprising at least 5% of share float. When institutional investors such as hedge fund and mutual fund managers make these purchases, it indicates that they expect these stocks to outperform into the future. Because these firms tend to have more sophisticated market data than the average investor, we often feel more confident in their trading decisions. 

Finally, we looked for significant short covering month over a month. This is a sign that short sellers, who benefit when share price falls, expect more upside than downside from these names.

[Similar lists: Funds Are Buying 3 High-Yield Dividend Stocks in Greece]

The List

Would you follow "smart money" investors in buying these stocks? Use this list as a starting point for your own analysis.

1. Basic Energy Services, Inc. ( BAS): Provides a range of well site services to oil and gas drilling and producing companies in the United States.

Market cap at $530.47M, most recent closing price at $13.38.

Net institutional purchases in the current quarter at 2.5M shares, which represents about 6.79% of the company's float of 36.84M shares. Top holders are Credit Suisse with 29.18% of outstanding shares, followed by Dimensional Fund Advisors with 4.85% and The Vanguard Group with 4.4%. 

Shares shorted have decreased from 5.11M to 4.32M over the last month, a decrease which represents about 2.14% of the company's float of 36.84M shares. Days to cover ratio at 4.5 days.
 

2. Approach Resources, Inc. ( AREX): Engages in the acquisition, exploration, development, and production of oil and gas properties in the United States.

Market cap at $950.91M, most recent closing price at $25.39.

Net institutional purchases in the current quarter at 1.8M shares, which represents about 5.3% of the company's float of 33.97M shares. Top holders are First Manhattan Company with 11.97% of outstanding shares, followed by Goldman Sachs with 7.06% and Vanguard Group with 5.37%. 

Shares shorted have decreased from 8.85M to 7.98M over the last month, a decrease which represents about 2.56% of the company's float of 33.97M shares. Days to cover ratio at 12.09 days.
 

3. Tidewater Inc. ( TDW): Provides supply vessels and marine support services to the offshore energy industry.

Market cap at $2.91B, most recent closing price at $57.74.

Net institutional purchases in the current quarter at 5.2M shares, which represents about 10.68% of the company's float of 48.71M shares. Top holders are Shapiro Capital Management Company with 5.5% of outstanding shares, Franklin Resources with 5.46% and Perkins Investment Management with 5.49%. 

Shares shorted have decreased from 3.63M to 2.38M over the last month, a decrease which represents about 2.57% of the company's float of 48.71M shares. Days to cover ratio at 3.68 days.
 

 

( List compiled by Kapitall's Mary-Lynn Cesar. Institutional data sourced from Fidelity. Short data sourced from Yahoo! Finance. All other data sourced from Finviz.)

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