Most Popular Energy Stocks Under $5

Crude oil prices have been enjoying a great run since reaching a 12-year low in February, thanks to mounting signs that the global crude oil supply glut has started to slowly fade away amid declining production in the United States. Analysts at investment bank Goldman Sachs, an outspoken bear on crude oil prices, recently changed their prospects on crude, saying that “the oil market has gone from nearing storage saturation to being in deficit much earlier than we expected”. The Minister of Economy in the United Arab Emirates, Sultan Bin Saeed Al Mansoori, said at a conference in Abu Dhabi on May 30 that “it’s possible for oil prices to reach $60 or more during this summer”. Assuming his prophecy turns out to be accurate, energy-related stocks may have more room to run in the foreseeable future, though it should be noted that if crude prices extend their buoyant rally to such levels, some U.S oil exploration and production companies may start operating more wells in the near future, which may put pressure on crude prices yet again. We at Insider Monkey decided to lay out a list of the five energy stocks that have a price tag below $5 which are the most-favored by the investment firms that we track.

At Insider Monkey, we track around 765 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details about our small-cap strategy).

#5. Gran Tierra Energy Inc. (NYSEMKT:GTE)

– Investors with long positions (as of March 31): 16

– Aggregate value of investors’ holdings (as of March 31): $105.26 Million

The hedge fund sentiment towards Gran Tierra Energy Inc. (NYSEMKT:GTE) increased during the first quarter of 2016, as the number of funds tracked by Insider Monkey with stakes in the company increased to 16 from 13 quarter-over-quarter. Nonetheless, the overall value of those stakes dropped to $105.26 million from $110.32 million quarter-over-quarter. The 16 asset managers accumulated nearly 15% of Gran Tierra Energy’s outstanding common stock. Gran Tierra Energy, which focuses on oil and natural gas exploration and production in Colombia, has seen its shares advance by 35% since the beginning of 2016. The company’s oil and gas sales for the first three months of 2016 came in at $57.40 million, down from $76.23 million reported in the same period of 2015. Meanwhile, Gran Tierra Energy’s oil and gas sales volumes for the quarter increased by 31% to 25,430 barrels of oil equivalent per day. Jim Simons’ Renaissance Technologies upped its stake in Gran Tierra Energy Inc. (NYSEMKT:GTE) by 23% during the first quarter, to 7.20 million shares.

#4. Denbury Resources Inc. (NYSE:DNR)

– Investors with long positions (as of March 31): 17

– Aggregate value of investors’ holdings (as of March 31): $56.51 Million

The number of hedge funds in our system with long positions in Denbury Resources Inc. (NYSE:DNR) remained unchanged at 17 during the first three months of 2016. However, the aggregate value of those long positions dropped to $56.51 million from $61.80 million during the quarter. Approximately 7% of Denbury’s outstanding shares were held by the 17 hedge funds tracked by Insider Monkey. The shares of the independent oil and natural gas company, which has operations in the Gulf Coast and Rocky Mountain regions, have seen their market value skyrocket by 94% since the start of 2016. The company has a capital development budget of $200 million for 2016, which is anticipated to be mainly funded with cash flow from operations. It is important to note that Denbury Resources’ oil assets have relatively low decline rates, so the company’s 2016 production is expected to decline by less than 10% despite plans to significantly reduce capital spending. David Dreman’s Dreman Value Management acquired a new stake of 764,423 shares of Denbury Resources Inc. (NYSE:DNR) during the March quarter.

We’ll study the three energy stocks currently trading below $5 per share that hedge funds love the most.

#3. Seadrill Ltd (NYSE:SDRL)

– Investors with long positions (as of March 31): 22

– Aggregate value of investors’ holdings (as of March 31): $110.83 Million

The hedge fund industry was mildly bullish on Seadrill Ltd (NYSE:SDRL) during the first quarter of 2016, as the number of money managers in our database with equity investments in Seadrill increased to 22 from 21 quarter-over-quarter. Similarly, the overall value of those equity investments rose to $110.83 million from $57.95 million during the three-month period. The 22 hedge funds invested in Seadrill held almost 7% of the company’s outstanding shares, which are down by 3% year-to-date. The company owns and operates a fleet of 38 offshore drilling units, which consist of seven drillships, 12 semi-submersible rigs and 19 jack-up rigs. Analysts at Credit Suisse consider Seadrill to be on a “winding road to a workout”, as the company’s high indebtedness needs some reshuffling. Credit Suisse analysts, who have an ‘Underperform’ rating and price target of $1 on Seadrill, anticipate increased idle time for the company’s drilling rigs after several contracts were recently terminated. Himanshu H. Shah’s Shah Capital Management added a 1.45 million-share position in Seadrill Ltd (NYSE:SDRL) to its portfolio during the first quarter of 2016.

#2. Cobalt International Energy Inc. (NYSE:CIE)

– Investors with long positions (as of March 31): 25

– Aggregate value of investors’ holdings (as of March 31): $429.06 Million

Cobalt International Energy Inc. (NYSE:CIE) also received some love from the hedge funds monitored by Insider Monkey, as the number of asset managers invested in the company climbed to 25 from 23 quarter-over-quarter. Nonetheless, the aggregate value of those asset managers’ equity investments in CIE declined to $429.06 million from $577.02 million during the period. It is important to note that the 25 hedge funds with stakes in CIE stockpiled a whopping 35% of the company’s outstanding shares. The shares of the independent E&P company, which has operations in the deepwater U.S. Gulf of Mexico, are 61% in the red year-to-date. Cobalt International Energy has not generated meaningful revenue since going public in December 2009, as the company achieved initial production of oil and gas from the Heidelberg field in January of 2016. As a result, the company’s oil and gas revenue for the first three months of 2016 was $1.6 million. John Paulson’s Paulson & Co. owns 39.55 million shares of Cobalt International Energy Inc. (NYSE:CIE) as of March 31.

#1. California Resources Corp (NYSE:CRC)

– Investors with long positions (as of March 31): 32

– Aggregate value of investors’ holdings (as of March 31): $88.00 Million

California Resources Corp (NYSE:CRC) received more attention from the hedge fund industry during the first quarter of 2016, with the number of funds invested in the company increasing to 32 from 29 quarter-over-quarter. In spite of that, the overall value of those funds’ equity investments in CRC plunged to $88.00 million from a much higher figure of $237.28 million, though that still accounted for 22% of the company’s shares. The independent oil and natural gas E&P company, which operates properties solely within the State of California, has seen its shares go down by 33% in value year-to-date. The disappointing stock performance has been mainly attributable to investor worries over the company’s extremely levered balance sheet, as higher crude oil prices alone will not be able to improve CRC’s financial health. The company needs to conduct asset monetizations to reduce its heavy debt burden. Cliff Asness’ AQR Capital Management reported owning 29.47 million shares of California Resources Corp (NYSE:CRC) in its latest 13F filing.

Disclosure: None