3 Cheap Energy Stocks That Are Poised to Explode in 2018

Oil prices have been on a steady rise since the middle of last June, surging by over 50% to reach $66 per barrel by the end of January. Naturally, that surge was great news for energy investors, as many stocks in the sector swing in lockstep with the price of crude. The broader market selloff earlier this month dragged crude back down to $59 in early-February, but it’s since rebounded to over $63 and there could be further gains in store, as oil inventories have finally bottomed out after three years of steady oversupply.

Given that some energy equities have yet to fully rebound from the market selloff, now looks like a great time to grab some stocks at a discount. To that end, we’ve uncovered three of the most popular energy stocks among hedge funds as of the end of 2017 (the hedge funds in our database own over 15% of each company’s shares), all of which have yet to fully recover from the market selloff.

At Insider Monkey, we track insider trading and hedge fund activity to uncover actionable patterns and profit from them. We track over 600 of the most successful hedge funds ever in our database and identify only their best stock picks. Our newest quarterly stock picks were released this month, which investors can gain access to by becoming a subscriber to Insider Monkey’s premium newsletters.

Patterson-UTI Energy, Inc. (NASDAQ:PTEN)

How Many Hedge Funds Own PTEN: 40

How Much Money Hedge Funds Have Invested in PTEN: $805 million

Recent Patterson-UTI Energy, Inc. (NASDAQ:PTEN) Selloff Unjustified: Shares of Patterson-UTI have been battered to the tune of a 20% decline in February, due in part to the broader selloff as well as a disappointing earnings report. Patterson-UTI missed earnings estimates by $0.02 per share as expenses soared in the fourth quarter (direct operating expenses tripled to $567.9 million).

However, BMO upgraded Patterson-UTI’s shares to ‘Outperform’ on February 14, saying the February declines were unwarranted, saying that the company’s fundamentals are improving that there could be some further second-half 2018 upside thanks to up to 200 rigs being added this year.

Bigger Patterson-UTI Energy, Inc. (NASDAQ:PTEN) Dividend on the Way?: Some investors were also disappointed at the lack of a dividend increase during the company’s latest conference call. However, BMO believes the company’s free cash flow yield will be one of the best in the industry in 2018 and that its dividend could receive a nice hike in the future because of that, perhaps as much as 50%.

On the next page we’ll look at two other cheap energy stocks that are popular among the best investors in the world.