Pat Dorsey of Morningstar sees fewer opportunities in the stock market now than he did in March 2009, as the pool of 5-star Morningstar stock shrank significantly since then.
In the Energy Sector, he does not see much of value in big oil companies like Exxon Mobiles and Chevrons, but there are opportunities in the energy transport (pipelines) and midcap Exploration and Production companies.
Here are the three companies he mentioned:
1. Energy Transfer Partners L.P. (ETP)
Energy Transfer Partners, L.P. (ETP) is engaged in natural gas operations. The Company is also operates in the retail propane segment. The Partnership's natural gas operations includes miles of natural gas gathering and transportation pipelines, natural gas treating and processing assets located in Texas and Louisiana, and three natural gas storage facilities located in Texas. Energy Transfer Partners L.p. has a market cap of $7.36 billion; its shares were traded at around $43.61 with a P/E ratio of 18.02 and P/S ratio of 0.79. The dividend yield of Energy Transfer Partners L.P. stocks is 8.2%.
2. Ultra Petroleum Corp (UPL)
Ultra Petroleum is an independent, exploration and production company focused on developing its long life natural gas reserves. Ultra Petroleum Corp has a market cap of $7.73 billion; its shares were traded at around $51.06 with a P/E ratio of 28.69 and P/S ratio of 7.13. Ultra Petroleum Corp had an annual average earning growth of 48.6% over the past 5 years.
Dorsey likes the company because it has good low cost assets in Wyoming and is entering the Marcellus Shale plays. Marcellus Shale is located Appalachian Basin, and could be one of the country’s most promising natural gas reserve.
3. Range Resources Corp. (RRC)
Range Resources Corp. acquires, develops, and finances oil and gas properties in the U.S. Range Resources Corp. has a market cap of $8.07 billion; its shares were traded at around $51.12 with a P/E ratio of 73.03 and P/S ratio of 6.1. The dividend yield of Range Resources Corp. stocks is 0.31%. Range Resources Corp. had an annual average earning growth of 4.1% over the past 10 years.
Dorsey thinks the upper side of RRC is with the Marcellus Shale play. If the natural gas price does not go up so RRC can develop the natural gas fields profitably, RRC may have to sell some of those leasehold.
In the following video, Pat Dorsey discusses the energy sector opportunities (about 1/3 into the video):