Sifting through the flood of data generated by the stock markets is a daunting task – but Wall Street’s professional stock analysts are up to it. They’ve made careers, and reputations, by finding the golden nuggets in the data stream, the stocks that are ready for gains and are showing solid returns. The Street’s best analysts, who have compiled enviable records of success in recommending stocks to buy or avoid, bring analytical minds and deep experience to their calls – and investors would be wise to follow them.
Which brings us to Neal Dingmann, a 5-star analyst with Truist – and the best of the best, according to TipRanks’ rating of Wall Street’s professional stock watchers. Dingmann holds the #1 spot out of nearly 8,600 analysts, and boasts a 78% success rate with this stock calls. An investor who had followed Dingmann’s advice over the past 12 months would have realized a return of 31.3%.
Dingmann has been following his personal expertise, in the energy stock sector, and has pointed out three stocks in particular for investors to consider. All three show ‘Buy’ ratings, and Dingmann sees between 30% and 60% upside for them in the coming year. We can follow his lead, and dig into the details on these stocks, using the TipRanks platform to find their latest data.
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Viper Energy
The first stock on our list of ‘Dingmann picks’ is Viper Energy, a partnership company formed by Diamondback to operate as the owner of the parent company’s royalty interests. Put short, Viper owns land holdings in premier hydrocarbon production basins – primary in the Permian Basin of Texas – and collects royalties on the gas and oil extracted by the production operators. At the end of 2Q23, Viper’s mineral and royalty interest footprint totaled 27,178 net royalty acres.
In recent months, Viper has made some announcements that should interest investors. In July, the company announced its intent to change its corporate structure form a limited partnership company to a Delaware-based corporation. The shift, which is expected to be complete before the end of this year, will not affect Viper’s land or mineral holdings, or its mineral interests. Limited partners will see their equity interests converted into outstanding shares, and common shareholders will be able to vote on stockholder matters.
Following this, in September, Viper announced a large acquisition purchase in the Permian Basin. The company bought 7,300 net royalty acres from Warwick Capital Partners and GRP Energy Capital, for which it paid 9.02 million shares of common stock plus $750 million in cash. The cash portion was funded by cash on hand, borrowings against a credit facility, and up to $200 million in equity from Diamondback.
Turning to the financials, in its last quarterly report, from 2Q23, Viper’s top line came to $160.8 million. While down some 32% year-over-year, this result still beat the estimates by $2.25 million. At the bottom line, Viper’s earnings per share came to 47 cents by non-GAAP measures. This figure was 20 cents per share better than had been anticipated.
Viper pays out a common stock quarterly dividend, and is known to adjust the payment, or pay out a supplemental dividend, to keep the dividend in-line with distributable earnings. The dividend was last declared at the end of July and paid on August 17; the base payment of 27 cents per common share and the supplement of 9 cents combined for a 36-cent total dividend. The annualized base payment of $1.08 gives a yield of 3.68%.
In Dingmann’s view, Viper’s activity presents several positives for investors, including a solid return from dividends and buybacks. Dingmann writes of the company, “Viper continues to set production records driven by stable activity and incremental efficiencies by its key operator/parent FANG along with other producers driving cash available for distribution… The company’s payout (unit repurchases and total dividends) remains a strong 75% of cash available with the ability to simultaneously repay debt and make acquisitions.”
Looking ahead, Dingmann also notes that Viper has a smart strategy for expanding its holdings: “The incremental acreage appears contiguous to the company’s existing position setting up VNOM nicely for future operational upside. VNOM continues to be methodical with acquisitions adding only reasonably priced strategic deals versus growing for growth sake.”
All in all, Dingmann rates VNOM shares as a Buy, with a $47 price target to point toward a 60% one-year upside potential. (To watch Dingmann’s track record, click here)
Viper’s Strong Buy consensus rating is unanimous, based on 9 positive analyst reviews. The stock is selling for $29.34, and its average target price of $38.25 suggests an upside of 30% in the coming year. (See Viper stock forecast)
Magnolia Oil & Gas
Next up is Magnolia Oil & Gas, a hydrocarbon production company operating in south Texas. Specifically, Magnolia works in the Eagle Ford Shale and Austin Chalk formations of the Texas oilpatch, where the company has approximately 460,000 net acres. The daily production on these holdings averaged 81.9 Mboe/d in 2Q23, a result that was up 10% year-over-year. The increase reflects both continued demand for oil and gas as well as the highly productive nature of Texas’ oil deposits.
Earlier this summer, Magnolia completed its acquisition of a ‘small bolt-on oil and gas property’ in the Giddings area of its holdings. This acquisition was outside of Magnolia’s core area, but was made based on company knowledge of the local geology through its operations in Giddings. Magnolia is working its holdings in that region as a redeveloping emerging play. The company paid $40 million for the bolt-on assets.
The company’s Q2 report was a mixed affair. The top line figure came to $280.3 million, down over 42% y/y, while missing the estimates by almost $8.2 million. The bottom-line figure, an EPS of $0.48, was also down sharply from the $1.32 per share reported in 2Q22. However, it was 2 cents ahead of the forecast. The company had $676.6 million in cash on hand at the end of Q2, up 35% year-over-year.
For Dingmann, the key points here are Magnolia’s extensive footprint and its solid cash holdings. “Magnolia continues to own more acres than not only any small cap E&P but most large cap operators,” Dingmann said. “While the company still works to delineate its Giddings asset, we continue to believe a large amount of the acres will have positive prospective wells. Further, in our view, MGY has one of the best balance sheets with a material cash position that could lead to notably higher shareholder returns and the potential to largely mitigate any potential large holder sales. We believe some investors are overreacting on the near-term GOR (gas/oil ratio) and production with both likely returning to more average levels late this year and/or 2024.”
Quantifying his stance, Dingmann rates the shares as a Buy. He gives Magnolia a $30 price target, implying an upside of 33% on the one-year timeline.
There are 9 recent analyst reviews of this stock, split to 5 Buys and 4 Holds for a Moderate Buy consensus rating. The shares are trading for $22.59 and the $27.83 average price target suggests a 23% increase from that level. (See Magnolia stock forecast)
Permian Resources
Last on our Dingmann-backed list is Permian Resources, another of the energy exploration and production companies operating in Texas. It’s only natural that these firms have Dingmann’s attention; the redevelopment of the Texas oilpatch in the last two decades has put that state on the world map as a major energy exporter. Permian Resources is a pure-play production company working in the Delaware Basin, one of the richest hydrocarbon formations of the larger Permian Basin.
In all, PR’s holdings include some 180,000 net leasehold acres, in both the Texas panhandle and in New Mexico, as well as approximately 40,000 net royalty acres. As of the end of 2Q23, the company’s production numbers were strong, showing an 8% quarter-over-quarter increase. In crude oil, the company was putting out 84.4 MBbls/d, and its total average production, of all products, came to 165.9 Mboe/d.
Shares in PR are up some 76% year-to-date, an excellent performance even in the face of disappointing Q2 financial results. In the quarter, Permian reported revenues of $623.4 million, a result that was up 32% y/y but missed the forecast by $19.7 million. At the bottom line, the non-GAAP EPS came to 27 cents per share, 5 cents below expectations.
The Q2 results were followed by an agreement to acquire Earthstone Energy through an all-stock transaction worth approximately $4.5 billion. The acquisition, when completed, will establish Permian Resources as a leading producer in its namesake region, with a footprint exceeding 400,000 net acres.
Turning again to Dingmann, we find him upbeat on PR’s prospects whilst alleviating current investor worries around equity offerings. “We continue to consider the company one of the premiere producers as judged by their low operating costs and solid organic/external execution,” Dingmann said. “We believe PR is set up for a solid 2H23 along with ’24 potentially achieving a +20% yield. We believe much of investors’ future concerns over PR’s equity overhang should largely be put to bed after seeing the results of the last two equity issuances.”
To this end, Dingmann rates PR as a Buy, with a $20 price target to point toward a 34% upside on the one-year horizon.
There is a Strong Buy consensus rating on PR shares, based on 13 reviews that break down 10 to 3 in favor of Buy over Hold. The stock is selling for $14.96 and its $17.31 average target price suggests a one-year gain of 16%. (See PR stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
