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What are we looking for?

U.S.-listed energy companies that demonstrate a combination of upward price momentum, low debt levels and favourable operating margins. These companies are of particular interest given the outperformance of the energy sector compared with all other sectors in the S&P 500 Index year-to-date. The Energy Sector Fund ETF (XLE) has emerged as the top-performing S&P 500 sector ETF, with an impressive return of 17.1 per cent. In light of this, we aimed to identify U.S. energy stocks that stand out as outliers within this uptrend.

The screen

We used Trading Central Strategy Builder to search for U.S.-listed energy stocks that have upside price momentum from a quantitative perspective, low debt and favourable operating margins.

  • We initiated the screening process by implementing a minimum market capitalization threshold of US$5-billion. This step was taken to filter out smaller, more junior companies within the sector, which typically exhibit higher-than-average volatility.
  • Next, we screened for energy stocks that have a debt-to-equity ratio of less than 1. A debt-to-equity ratio less than 1 means a company has more money from owners (equity) than it owes to lenders (debt), which lowers risk and gives more flexibility for growth. The higher the ratio, the more leveraged the company is.
  • We are also interested in energy companies with operating margins of 20 per cent or more, which tells us how much profit they make from each dollar of revenue. Higher margins are better.
  • Finally, we screened for stocks in the energy sector that have the highest TC Momentum Factor rating. The momentum factor refers to the tendency of winning stocks to continue performing well in the near term.

We have also included dividend yield, year-to-date and one-year percentage returns for reference.

More about Trading Central

Trading Central is a global leader in financial market research and investment analytics for retail online brokers and institutions. Its product suite provides actionable trading ideas based on technical and fundamental research covering stocks, exchange-traded funds, indexes, forex, options and commodities. Strategy Builder, our stock screener, is available through leading retail brokers in Canada and worldwide.

What we found

Energy stocks with momentum and other positive merits

RANK COMPANYTICKERMKT.CAP. ($Bil) RECENT PRICE ($)DEBT/EQTY.OPER.MARGIN (%)TC MTM.FCTR.RTNGDIV.YLD (%)YTD PERF. (%)1Y PERF. (%)INDUSTRY
1Diamondback Energy IncFANG-Q36.24202.950.4154.9383429.442.1Oil & Gas
2Permian Resources CorpPR-N10.3317.880.6247.07833.3730.559.9Oil & Gas
3Canadian Natural Resources LtdCNQ-N84.8179.630.2725.63693.6120.734.7Oil & Gas
4Pioneer Natural Resources CoPXD-N63.02268.950.2333.77644.0617.128.2Oil & Gas
5Chord Energy CorpCHRD-Q7.59182.570.1132.74615.658.629.7Oil & Gas
6SM Energy CoSM-N6.0252.130.4438.87821.3833.574Oil & Gas
7DT Midstream IncDTM-N6.1663.480.7950.65634.4215.230.8Oil & Gas
8Chesapeake Energy CorpCHK-Q11.8190.510.230.46553.2217.317.7Oil & Gas
9Matador Resources CoMTDR-N8.5469.110.5643.3691.1719.335.6Oil & Gas
10Ovintiv IncOVV-N14.5654.340.6427.17712.2222.637.4Oil & Gas
11Crescent Point Energy CorpCPG-N5.438.80.5434.31583.8727.216.6Oil & Gas
12Pembina Pipeline CorpPBA-N20.5635.740.8226.56675.533.97.8Oil & Gas
13Occidental Petroleum CorpOXY-N60.0267.590.9522.7571.312.84.9Oil & Gas

Source: Trading Central

Our screener ranks the list based on all performance and revenue criteria.

Topping our list is Texas-based Diamondback Energy Inc. FANG-Q, an independent oil and natural gas company focused on the acquisition, development, exploration and exploitation of unconventional, onshore oil and natural gas reserves primarily in the Permian Basin in West Texas. The stock has the highest operating margin on our list at 54.93 per cent. The stock has one of the highest TC Momentum Factor ratings on our list at 83 out of 100 which is very strong owing to the strong price trend that has remained above the stock’s 20-day moving average since Feb. 12.

Independent crude oil and natural gas exploration, development and production company Canadian Natural Resources Ltd. CNQ-N has the largest market cap on our list at $84.81-billion. The Calgary-based company has one of the lowest debt-to-equity ratios on our list at 0.27 along with an operating margin of 25.63. The stock has also remained in an uptrend since breaking back above its 20-day price moving average on Feb. 14 and is now trading at a 52-week high.

Chesapeake Energy Corp. CHK-Q, an Oklahoma-based oil and natural gas exploration company, stands out with the lowest debt-to-equity ratio on our list at just 0.2, indicating strong financial health. Furthermore, the stock broke above its 20-day price moving average on Feb. 14 and continues to rise, approaching a 52-week high.

The investment ideas presented here are for information only. They do not constitute advice or a recommendation by Trading Central in respect of the investment in financial instruments. Investors should conduct further research before investing.

Gary Christie is head of North American research at Trading Central in Ottawa.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 02/05/24 6:40pm EDT.

SymbolName% changeLast
FANG-Q
Diamondback Energy
+0.36%198.39
PR-N
Permian Resources Corp
+0.8%16.32
CNQ-N
Canadian Natural Resources
+0.39%77.37
PXD-N
Pioneer Natural Resources Company
+0.73%269.62
CHRD-Q
Chord Energy Corp
+0.8%182.03
SM-N
Sm Energy Company
+0.55%49.22
DTM-N
Dt Midstream Inc
+0.58%67.27
CHK-Q
Chesapeake Energy Corp
+0.43%92.08
MTDR-N
Matador Resources Company
+0.34%62.29
OVV-N
Ovintiv Inc
+0.08%49.83
CPG-N
Crescent Pt Energy
-0.12%8.59
PBA-N
Pembina Pipeline Cor
+0.6%37.16
OXY-N
Occidental Petroleum Corp
+0.08%63.46

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