NEW YORK (TheStreet) -- So far in 2014, the market has been off to a mixed start. With question marks about the strength of the U.S. consumer (with the latest retail results calling consumer spending into question) and mixed macro data (including the latest jobs report), the clean cut bull case is becoming more complicated.
Now, one of the reasons the biotech space was so hot last year was because it is defensively postured (read: more immune to macro-economic trends) but it has growth.
Surprisingly enough, within energy, there is a cohort that is similarly positioned: the exploration & production (E&P) companies.
Now, there is no question that these names will trade with the price of oil. But it just so happens that the domestic shale plays can appreciate based on strong acreage, production growth, and low costs.
2013 was the year of the Permian Basin, 2012 was the year of the Eagle Ford, and 2011 was the year of the Bakken. What is the theme for 2014? At this point, most of the plays have been discovered, with even new finds in the Utica "known." So key is choosing the names with the BEST acreage--because they will continue to outperform.
Don't believe these names can be decoupled from commodity prices? Take a look at Cabot Oil & Gas (COG) which has been one of the best performers in the group despite continued rock bottom natural gas prices. The company is still well-positioned with 30% to 50% production growth anticipated in 2014.
Sell-offs in this group provide an opportunity to buy best of breed names because this shale revolution is a long-term theme.
The best name in the Eagle Ford and Bakken remains EOG Resources (EOG). This name could generate $1 billion in free cash flow in 2014 (that is unheard of!), making this name more defensively positioned even though it is a growth name.
Best of the Permian? Pioneer Natural Resources (PXD), along with Cimarex (XEC) which is on the Delaware side of the basin. The Permian has about six tonnes to target within the same acre (it is one of the thickest shales) and much upside remains.