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6 Oil Stocks to Consider as Storage Space Concerns Grow

A week after U.S. oil prices plunged into negative territory as the Covid-19 pandemic continues to suppress demand, the commodity declined more than 20% on Monday morning.

Since oil storage facilities around the world continue to fill up as manufacturing has slowed down and consumers are not traveling, West Texas Intermediate for June delivery declined 25% to $12.71 per barrel, while international benchmark Brent crude tumbled 6.2% to $20.11 per barrel.


The decrease in demand has dragged several energy stocks down along with it. As such, good value opportunities could be found among companies that are not only trading below the Peter Lynch value but have posted a gain over the past month.

Lynch, the renowned investor who managed Fidelity's Magellan Fund between 1977 and 1990, developed this strategy in order to simplify his stock-picking process. Setting the standard at a price-earnings ratio of 15, stocks trading below this level are often considered good investments since their share prices are likely to appreciate over time, creating value for shareholders. The GuruFocus All-in-One Screener, a Premium feature, also looked for U.S oil and gas companies with a market cap of at least $5 billion, a business predictability of at least one out of five stars and that returned at least 30% over the past month.

Stocks that met these criteria as of April 27 were Valero Energy Corp. (NYSE:VLO), Energy Transfer LP (NYSE:ET), Marathon Petroleum Corp. (NYSE:MPC), Plains All American Pipeline LP (NYSE:PAA), Magellan Midstream Partners LP (NYSE:MMP) and Phillips 66 (NYSE:PSX).

Valero Energy

Leading the pack with a 51.52% gain over the past month, shares of Valero Energy were trading around $53.27 on Monday with a market cap of $22.76 billion, a price-earnings ratio of 9.49, a price-book ratio of 1.05 and a price-sales ratio of 0.2.

The Peter Lynch chart suggests the stock is undervalued. The GuruFocus valuation rank of 5 out of 10 leans more toward overvaluation, however.

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GuruFocus rated the San Antonio, Texas-based company's financial strength 6 out of 10 and its profitability 7 out of 10. The one-star business predictability rank is on watch as a result of a decline in revenue per share over the past 12 months. GuruFocus says companies with this rank typically return 1.1% per annum over a 10-year period.

Of the gurus invested in Valero, Barrow, Hanley, Mewhinney & Strauss has the largest stake with 1.33% of outstanding shares. Other top guru shareholders include Pioneer Investments (Trades, Portfolio), Jim Simons (Trades, Portfolio)' Renaissance Technologies, Joel Greenblatt (Trades, Portfolio), Louis Moore Bacon (Trades, Portfolio), Jeff Auxier (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio).

Energy Transfer

Next is Energy Transfer with a gain of 49.49% for the past 30 days. With a $19.37 billion market cap, a price-earnings ratio of 5.3, a price-book ratio of 0.89 and a price-sales ratio of 0.35, shares were trading around $7.21 on Monday.

According to the Peter Lynch chart, the stock is undervalued. The GuruFocus valuation rank of 8 out of 10 supports this assessment.

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The company, which is headquartered in Dallas, has a 3 out of 10 financial strength rating and a 7 out of 10 profitability rank. The one-star business predictability rank is on watch due to a decline in revenue per share over the past five years.

With a 0.42% stake, David Tepper (Trades, Portfolio) is the company's largest guru shareholder. Leon Cooperman (Trades, Portfolio), Pioneer, Simons' firm, Alan Fournier (Trades, Portfolio), BP Capital Fund Advisors (Trades, Portfolio), George Soros (Trades, Portfolio) and Mario Gabelli (Trades, Portfolio) also have positions in the stock.

Marathon Petroleum

Third is Marathon Petroleum, which has climbed 47.2% over the past month. Yielding a market cap of $17.02 billion, shares were trading around $26.46 on Monday with a price-earnings ratio of 6.59, a price-book ratio of 0.51 and a price-sales ratio of 0.14.

Based on the Peter Lynch chart, the stock appears to be undervalued.

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Based in Findlay, Ohio, the refining company has a 5 out of 10 financial strength rating and a 7 out of 10 profitability rank. The 2.5-star business predictability rank is on watch as a result of a slowdown in revenue per share growth. According to GuruFocus, companies with this rank return an average of 7.3% per year.

Paul Singer (Trades, Portfolio) is the company's largest guru shareholder with a 1.48% stake. Other top guru investors include Sarah Ketterer (Trades, Portfolio), Hotchkis & Wiley, Simons' firm, First Eagle Investment (Trades, Portfolio), Stanley Druckenmiller (Trades, Portfolio), Pioneer, Greenblatt and Steven Cohen (Trades, Portfolio).

Plains All American

Posting a return of 45.06% for the last month, Plains All American Pipeline has a market cap of $5.77 billion; its shares were trading around $8.05 on Monday with a price-earnings ratio of 3.05, a price-book ratio of 0.45 and a price-sales ratio of 0.18.

The Peter Lynch chart and GuruFocus valuation rank of 10 out of 10 suggest the stock is undervalued.

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The Houston-based pipeline operator has a financial strength rating of 5 out of 10 and a profitability rank of 6 out of 10. The one-star business predictability rank is on watch as a result of declining revenue.

Of the gurus invested in Plains All American, Michael Price (Trades, Portfolio) has the largest holding with 0.06% of outstanding shares. BP Capital and Simons' firm also own the stock.

Magellan Midstream Partners

With a market cap of $9.52 billion, Magellan Midstream Partners has risen 37.64% over the past 30 days. Its shares were trading around $41.80 on Monday with a price-earnings ratio of 9.38, a price-book ratio of 3.52 and a price-sales ratio of 3.51.

According to the Peter Lynch chart, the stock is undervalued. The GuruFocus valuation rank of 6 out of 10 also supports this assessment.

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The midstream energy company, which is headquartered in Tulsa, Oklahoma, has a financial strength rating of 4 out of 10 and a 9 out of 10 profitability rank. The 4.5-star business predictability rank is on watch due to declining revenue. GuruFocus data shows companies with this rank typically return an average of 10.6% per year.

With 0.04% of outstanding shares, Soros is the company's largest guru shareholder. BP Capital, Simons' firm and Pioneer also own the stock.

Phillips 66

Last but not least, Phillips 66 posted a return of 32.80% for the month. Sporting a market cap of $27.68 billion, shares were trading around $63.49 on Monday with a price-earnings ratio of 9.31, a price-book ratio of 1.13 and a price-sales ratio of 0.26.

Based on the Peter Lynch chart, the stock appears to be undervalued.

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Phillips 66's financial strength and profitability were both rated 6 out of 10 by GuruFocus. The one-star business predictability rank is on watch.

Barrow, Hanley, Mewhinney & Strauss is the company's largest guru shareholder with a 1.53% stake. Other top guru investors include Simons' firm, Pioneer, Cohen, Greenblatt, Tweedy Browne (Trades, Portfolio), Warren Buffett (Trades, Portfolio), Jones and Gabelli.

Disclosure: No positions.

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This article first appeared on GuruFocus.