Digging Through the Post-Holiday Bargain Bin (for Stocks)!

If you’re anything like me, you probably have an email inbox jam-packed with post-holiday offers. 60% off shirts and pants. 70% off arts and crafts stuff for the kids. “Everything must go” deals for Christmas lights and other décor. Those kinds of deals make this a great time to dig through the bargain bin at the mall.

But what about in the stock market? Are there bargains to be found in beaten-down equities, too?

Well, consider energy shares. The Weiss Ratings BUY/SELL breakdown in that sector has been ugly for a while. That’s a symptom of the well-documented problems with balance sheets and earnings for many oil and gas producers, shippers, processors, and transporters.

Just consider: Energy sector earnings are on track to drop from year-ago levels for the ninth consecutive quarter in Q4. For the full calendar year, profits are expected to be down by a hefty 76%, according to FactSet. That makes energy far and away the worst performer among the 11 S&P 500 sectors.

But after a terrible start to the year, crude oil prices are now rallying steadily. In fact, expectations about stronger economic growth -- plus the output cuts that OPEC and non-OPEC producers recently agreed to -- have driven oil back up to the $55-a-barrel area. That’s the highest level going all the way back to July 2015.

As a result, the rate of deterioration in overall energy earnings has shrunk dramatically. Analysts actually expect positive profit growth for three out of the six sub-industries in the energy sector in Q4. That’s helping many energy stocks turn the corner when it comes to performance and technical momentum.

Case in point: We rate just over 1,200 energy stocks. A year ago, less than 2% of them were showing attractive returns using our proprietary momentum index, which weights recent trading action more heavily. Now, more than 6% of our energy stock universe meets that criteria.

That’s still not a huge number. And our overall Weiss Ratings, which take into account many other metrics besides technical momentum, haven’t made a significant turn for the better in the sector. But it does show that the tide is beginning to turn for energy, and the trend should continue if oil and gas prices continue to firm up.

Bottom line: You may want to dig through the energy sector bargain bin this holiday season – and we can help. Some of our top-rated energy stocks with a market capitalization of at least $500 million include Antero Midstream Partners LP (AM, Rated “B”), REX American Resources Corp. (REX, “B-”), and Magellan Midstream Partners LP (MMP, “B-”).

Alternatively, our stock screener can help you identify potential candidates in the energy sector based on a huge number of factors and metrics. Or if you’re not yet a Weiss Platinum subscriber, you can gain access to our screener (and other premium features) by clicking here.