Don't Dismiss These 3 Energy Stocks

NextEra Energy Inc (NYSE:NEE), Phillips 66 (NYSE:PSX), and Tesoro Corporation (NYSE:TSO) have each touched an all-time high in the past four months

by Karee Venema

Published on Feb 3, 2016 at 2:30 PM

A steep decline in oil prices has been a drag on a number of big energy names, including Dow components Exxon Mobil Corporation (NYSE:XOM) and Chevron Corporation (NYSE:CVX). However, not all energy stocks have buckled under this intense selling pressure. In fact, sector components NextEra Energy Inc (NYSE:NEE), Phillips 66 (NYSE:PSX), and Tesoro Corporation (NYSE:TSO) have each displayed moments of greatness recently, touching new all-time highs within the past four months.

NEE, for example, topped out at a record peak of $115.51 earlier this afternoon -- after Annex Advisory Services LLC said it upped its stake by 18.8% in the fourth quarter -- but was last seen 0.3% higher at $114.24. Longer term, the shares have tacked on 22% since hitting an annual low of $93.74 in September, helped in part by a well-received earnings report and bullish brokerage notes from Baird and Goldman Sachs in late January.

Option traders, meanwhile, have been bracing for a pullback. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), NextEra Energy Inc's 10-day put/call volume ratio of 1.73 sits in the 82nd annual percentile. While it's possible a portion of this accelerated put buying is of the protective kind, an unwinding of the hedges related to the bearish bets could create a tailwind for the shares.

PSX hit its highest perch on record -- $94.12 -- in early November. More recently, the stock had slid 17% to $78.18, despite an ongoing vote of confidence from the Oracle of Omaha. In fact, Warren Buffet said last month his Berkshire Hathaway Inc. (NYSE:BRK.A) had increased its stake in PSX to more than 13% in January from around 11% in August.

On the sentiment front, analysts have taken the glass-half-full approach to Phillips 66. Of the 10 brokerages following the shares, seven maintain a "buy" or better rating, without a single "sell" to be found. Plus, the average 12-month price target of $93.91 stands at a 20% premium to current trading levels -- and sits near record-high territory.

In late November, TSO topped out at a record high of $119.67, but has since tumbled almost 36%. Today, the stock is off 4.3% at $77.02 and just hit an annual low of $75.81 -- after Barclays, Goldman Sachs, and J.P. Morgan Securities all cut their price targets in the wake of Monday night's fourth-quarter earnings miss -- but has found a foothold atop its 120-week moving average.

While this recent sell-off could translate into a buying opportunity down the road, traders have been quick to bet on more losses. At the ISE, CBOE, and PHLX, for instance, Tesoro Corporation's 50-day put/call volume ratio of 1.87 rests in the bearishly skewed 85th annual percentile. Elsewhere, short interest jumped 9.2% in the last two reporting periods, and now accounts for a healthy 6% of the stock's available float.

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