In this article, we will look at the 10 Stocks That Will Skyrocket When Oil Prices Fall.
Oil prices continue to rise amid global efforts for peace in the Middle East. There is hardly a sector that hasn’t been negatively impacted by the elevated oil prices and supply constraints. Companies that benefit from higher oil prices have already seen their stock go up, but the rest of the economy is struggling. Transportation costs are going up as energy costs continue to rise. Companies that rely on raw materials derived from petrochemicals are seeing their supply systems sharply affected. The uncertainty is killing the market, and investors are fleeing.
On the flip side, it is also a well-established fact that markets rebound very quickly once the uncertainty goes away. Knowing which sectors are most likely to rebound can help generate incremental returns. That time could well be coming soon, as Goldman Sachs reassesses its oil price forecast. The research firm trimmed its Brent price target to $90 from $99 on April 8. Oil prices could fall more quickly than many anticipate, generating new opportunities for investors.
Best days in the market often come right after the biggest crash and in uncertain environments. Missing out on them can negatively impact long-term gains, making it important to stay invested in the right stocks before the rally arrives. This is why we decided to look at the 10 stocks that will skyrocket when oil prices fall.
Our Methodology
To come up with our list of 10 stocks that will skyrocket when oil prices fall, we first shortlisted the sectors that are negatively impacted by higher oil prices. These are businesses that rely on oil or oil-derived products, either as raw materials or as a significant energy cost in their operations. Once we had a list of these stocks, we filtered out the ones with a market cap of at least $2 billion and a consensus upside of at least 35%. We limited our final selection to companies that have recently reported noteworthy developments likely to impact investor sentiment. These stocks are also popular among analysts and elite hedge funds, and are ranked in ascending order of their potential upside.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 498.7% since May 2014, beating its benchmark by 303 percentage points (see more details here).
Note: All share price data in the article is as per market close on April 9.
10. Quaker Chemical Corporation (NYSE:KWR)
Based on CNN’s analyst ratings compilation, Quaker Chemical Corporation (NYSE:KWR) enjoys strong support from Wall Street analysts, with 4 out of 5 analysts rating the stock a Buy. It has a median price target of $175, implying a further 36% upside from the current levels.
Moreover, the stock is still trading below its lowest price target of $170. On February 27, Deutsche Bank analyst David Begleiter increased the firm’s price target on Quaker Chemical Corporation (NYSE:KWR) from $160 to $170 while maintaining a Buy rating.
In contrast to Deutsche Bank, RBC Capital cut its price target on Quaker Chemical Corporation (NYSE:KWR) on February 24. RBC Capital Analyst Arun Viswanathan reduced the firm’s price target on the stock from $190 to $184 while maintaining an Outperform rating. The firm pointed out that the stock reacted negatively after the company posted its fourth-quarter results and issued a soft outlook. It guided for mid-single-digit growth in sales and EBITDA, which falls slightly below the consensus expectation of around 10%.
Quaker Chemical Corporation (NYSE:KWR) operates as an industrial process fluids provider worldwide. It produces, markets, and develops different formulated specialty chemical products, as well as provides chemical management services. The company serves automotive, mining, aerospace, steel, and other companies.
9. Alaska Air Group, Inc. (NYSE:ALK)
On April 2, TD Cowen analyst Thomas Fitzgerald reiterated his Buy rating on Alaska Air Group, Inc. (NYSE:ALK) while lowering the firm’s price target. He cut the firm’s price target on the stock from $66 to $45. The downward-adjusted price target still offers an 14% upside from the current levels. The price target revision was part of the firm’s first-quarter earnings preview, where it reduced price targets across the airline sector.
According to the analyst, investors are becoming more cautious about the strength of travel demand, mainly due to expectations of prolonged higher energy prices and slowing credit card spending. As a result, TD Cowen’s estimates for the six major airlines are now below market consensus heading into the first quarter.
Earlier, on March 31, Goldman Sachs analyst Catherine O’Brien also took a similar stance on Alaska Air Group, Inc. (NYSE:ALK). She lowered the firm’s price target on the stock from $68 to $61 while maintaining a Buy rating. The firm’s revised price target reflects an additional 54% upside from the current levels.
Alaska Air Group, Inc. (NYSE:ALK) is an airline company offering scheduled passenger and cargo services using Boeing jet aircraft across the United States. It also operates in parts of Mexico, Belize, Canada, Guatemala, Costa Rica, and the Bahamas. The company operates in the Hawaiian Airlines, Alaska Airlines, and Regional segments.
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