Risk appetite has returned to the global financial markets in
2012, and this has helped the volatile energy sector to a 3.48%
gain on the year thus far. Despite the positive year-to-date
trajectory, the energy complex has severely under-performed the
S&P 500, which is up 10.41% during the same time frame.
In light of persistently high oil prices and continued
tensions in the Middle East, targeting energy names at current
levels could lead to big profits if the sector can reverse its
recent under-performance. With this trading idea in mind, I ran a
simple scan looking for small-cap drilling and exploration names
that are significantly outperforming the energy sector as a
whole.
For traders who follow the philosophy of "buy high, sell
higher," and "own the leaders," these names may be of some
interest. The scan identified the 4 leading small-cap stocks in
the drilling and exploration sub-sector, each notching a gain of
over 30% in 2012. Below, Benzinga highlights these 4 names.
BPZ Resources (NYSE:
BPZ
)
- This sub-$500 million company is showing significant relative
strength versus the energy sector as a whole in 2012. The stock
has added 43% year-to-date, although shares are down nearly 15%
over the last 52-weeks. Nevertheless, it appears that a new
uptrend has been established in BPZ and the stock could continue
to rack up gains going forward. The stock is trading around 6%
above its 50-day moving average and 22.52% above its 200-day
moving average. BPZ is 15.94% below its 52-week high and 96.14%
above its 52-week low.
Cheniere Energy (NYSE:
LNG
)
- This company is engaged primarily in liquid natural gas-related
businesses. Despite severely depressed natural gas prices, LNG
has been soaring in 2012. The stock has more than doubled
year-to-date, and is sitting near new 52-week highs. The company
currently has a market cap of $2.80 billion. LNG shares are
showing considerable relative strength with the stock trading
14.30% above its 50-day moving average and more than 69% above
its 200-day moving average.
Venoco (NYSE:
VQ
)
- This stock has jumped over 65% in 2012 after a January merger
agreement was announced which valued the stock at $12.50. Under
the agreement, Venoco's Chairman and CEO, Timothy Marquez, will
acquire the company through a wholly owned entity, Denver Parent
Corp. Despite the stock's big gain in 2012, shares are still
trading significantly below the deal price of $12.50. Currently,
VQ is trading at $11.19, suggesting that the market is not
entirely convinced that this deal will close. A number of
lawsuits have been filed on behalf of VQ shareholders alleging
that the price and sale process were unfair, and these
shareholders are opposing the agreement. Given the spread between
the deal price and VQ's current share price, this stock may be of
interest to arbitrage investors willing to make a bet that the
merger does indeed close.
Vantage Drilling Company (NYSE:
VTG
)
- This stock has risen more than 37% so far in 2012 and remains
in a strong uptrend. Vantage is a small offshore drilling company
which operates a fleet of drilling units. The company only has a
market cap of $463 million and VTG shares currently trade at
$1.59. Given the company's small size, the stock is quite
sensitive to changes in drilling dayrates. The stock has been
showing impressive relative strength, and is trading 5.61% above
its 50-day moving average and 18.89% above its 200-day moving
average. Eight brokers cover the name, and the median Wall Street
price target on the stock is $2.23, implying significant upside
to current levels.
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