5 Cheap Oil Stocks Under $5

Looking for any of 5 cheap oil stocks under $5? Then you’ve come to the right place. As oil prices are expected to stabilize in the near term, oil stocks should become more attractive investments. When it comes to cheap oil stocks, their appreciation should be even more rewarding, although they carry more underlying risk and require a more detailed analysis to fully understand.

There are many oil stocks that an investor can buy and the general advice is to stick to the big names like Exxon Mobil Corporation (NYSE:XOM) or BP plc (ADR) (NYSE:BP). And it makes sense, because these are well-established companies with strong fundamentals and long dividend-paying histories, which makes them good additions to a portfolio. However, while including them in a retirement portfolio is a good idea, when less cash is available to invest and a higher reward is desired over the short- to medium-run, one might consider investing in riskier stocks in exchange for higher potential returns.

The question then becomes, how to narrow down the list of stocks up for consideration so that you can focus on those that deserve the most attention? One approach is to look at the stocks that enjoy support from large investors like hedge funds. This is what we do at Insider Monkey. Our database includes almost 700 hedge funds and other institutional investors and every quarter we analyze their 13F filings to monitor their collective sentiment towards thousands of stocks. We select some of those stocks as part of our investment strategy and share them with our premium subscribers (see more details). In addition, we use the data to compile lists of best stocks to invest in based on the hedge fund sentiment towards them.

Let’s get back to oil stocks. Generally speaking, energy is one of the best sectors to invest in, given that it is the most valuable market segment and energy demand is expected to grow considerably, driven by demand from China and India. 2017 might be a particularly good year to consider investing in oil stocks, as experts estimate that oil prices will stabilize this year and remain stable for the long-run. Goldman Sachs sees oil prices at around $50 per barrel, with fluctuations within 10-20%. With OPEC having agreed last year to cut production, the oversupply is expected to by cut by almost one-half this year, which would lead to more stabilization of prices. In this way, we can anticipate a more balanced market for the remainder of this year and beyond, which eliminates some of the uncertainty around oil companies. And if the oil stockpile is reduced at a faster rate than anticipated, prices could go even higher.

There are many oil stocks to invest in. For those that have more cash at their disposal, this list of the 11 best oil company stocks can provide some great ideas. For those who are not afraid of some risk and are looking for faster and higher returns, we have compiled a list of 5 cheap oil stocks under $5. The companies included in the list had the greatest number of investors long their shares as of the end of the first quarter, from among those hedge funds within our database. Check out the list beginning on the next page.

5. Gastar Exploration Inc (NYSEMKT:GST)

Let’s start with Gastar Exploration Inc (NYSEMKT:GST), which is actually a penny stock, as it is currently trading for under $1.00 per share. The company was owned by 17 funds from our database at the end of March, compared to 14 funds a quarter earlier. Among the largest shareholders of Gastar Exploration Inc (NYSEMKT:GST) is James Dinan’s York Capital Management, which disclosed ownership of 5.45 million shares in its latest 13F filing, up by 52% on the quarter.

As oil prices slid, Gastar Exploration Inc (NYSEMKT:GST)’s stock registered a more significant drop than some of its industry peers, due to the fact that the company is engaged in shale production, which usually comes at higher costs and lower margins. However, the company reported good first-quarter results, with a net loss of $0.06 per share missing estimates by just $0.01, while its revenue rose by 26.1% to $18.67 million and was $1.25 million ahead of estimates. The company also registered higher-than-expected average daily production of 5,700 barrels of oil equivalent.

4. Gran Tierra Energy Inc (NYSEMKT:GTE)

In Gran Tierra Energy Inc (NYSEMKT:GTE), the number of bullish investors declined by four to 18 during the first three months of 2017. Among the funds tracked by us, the three largest shareholders of Gran Tierra were Thomas E. Claugus’ GMT Capital, Jonathan Barrett and Paul Segal’s Luminus Management, and Joseph Oughourlian and Michael Brogard’s Amber Capital, all of which raised their stakes in Q1. GMT Capital increased its position by 16% on the quarter to 40.35 million shares, Luminus boosted its holding by 78% to 14.35 million shares, and Amber raised its position by 13% to 13.36 million shares.

Gran Tierra Energy Inc (NYSEMKT:GTE)’s stock is trading 26% in the red year-to-date. The company, which operates primarily in Colombia, reported EPS of $0.03 for the first-quarter, in-line with estimates, while its revenue of $94.70 million advanced by 65% on the year, but missed expectations by $17.50 million. Gran Tierra Energy has significant growth potential, as it spent last year acquiring other companies and is estimating that its net asset value will grow by 3-5X over the next five years.

3. Halcon Resources Corporation (NYSE:HK)

Halcon Resources Corporation (NYSE:HK) registered the highest Q1 increase in terms of the number of bullish investors among the stocks on the list, as 23 funds disclosed holding shares of the company as of the end of March, compared to 16 funds a quarter earlier. Among the investors that added Halcon Resources Corporation to their equity portfolios were Dan Loeb‘s Third Point and Steve Cohen’s Point72 Asset Management, which amassed 5.17 million shares and 2.33 million shares, respectively.

Earlier this year, Halcon Resources Corporation (NYSE:HK) entered into the Delaware Basin, where it currently holds around 41,555 acres and expects an internal rate of return of over 45% for that acreage. The company has also issued $850 million in unsecured notes due 2025 and has launched a tender offer to acquire $700 million worth of notes due 2020. The moves allowed Halcon to push back the maturity of its debt by five years and to repay some of its credit facility debt.

2. Noble Corporation (NYSE:NE)

The number of funds from our database long Noble Corporation (NYSE:NE) inched down by one to 27 during the first quarter. Among the largest shareholders of the company is Senator Investment Group, led by Doug Silverman and Alexander Klabin, which initiated a stake containing 10 million shares in the first quarter.

Noble Corporation (NYSE:NE) is a UK-based drilling contractor which provides services through its fleet of 28 offshore drilling units. For the first quarter, the company posted a net loss of $0.17 per share, which was better than the consensus estimate of a loss of $0.19, but its revenue of $363 million slid by 41% on the year and missed expectations by $3.10 million. However, the company sees positive trends, with tenders for jackups and floating rigs on the rise and it expects the oil market to become more stable, which will lead to an increase in the demand for rigs.

1. Chesapeake Energy Corporation (NYSE:CHK)

Finally, on the first spot among our list of 5 cheap oil stocks under $5 is Chesapeake Energy Corporation (NYSE:CHK). The company registered the most dramatic decrease in the number of investors with long positions in it, as there were 33 funds holding Chesapeake shares at the end of March, down by eight over the quarter. Among the investors tracked by us, billionaire Andreas Halvorsen‘s Viking Global held 20.20 million shares of Chesapeake Energy Corporation (NYSE:CHK) heading into the second quarter.

Chesapeake Energy Corporation (NYSE:CHK)’s stock has lost over 29% since the beginning of the year, but it’s 13% in the green over the past 12 months. As it generates most of its revenue from the production of natural gas, the company was hit hard by the decline of the commodity’s price. Nevertheless, a decline in price led to higher demand, as more power plants started to convert to natural gas from coal as a cleaner alternative. In addition, Chesapeake has managed to address its liquidity issues by selling assets and repaying debt. However, for a full comeback, Chesapeake Energy Corporation (NYSE:CHK) needs an increase in natural gas prices and/or the U.S government pushing harder to promote gas exports.

These are the top 5 cheap oil stocks under $5, based on smart money sentiment. While these investors do conduct meticulous research when it comes to any position they take, it’s important to remember that some of them have billions of dollars at their disposal and their stakes in these companies represent only a very small percentage of that. Thus, we consider this list to be a great starting point, but recommend further research, particularly if you’re planning on making a sizable financial commitment to any of these stocks.

Disclosure: None