2 Heavily Shorted Oil Stocks Set to Extend Their Trump Tailwinds

Transocean LTD (RIG) and National-Oilwell Varco, Inc. (NOV) have been among the top SPX stocks since the presidential election

Alex Eppstein
Dec 7, 2016 at 10:28 AM
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It's now been nearly a month since the U.S. presidential election. As most everyone knows, stocks have taken off during that time frame, with certain sectors showing impressive strength. One such sector is energy, as these stocks have been powered higher by a steady rise in crude oil prices, as well as potentially favorable policy changes by President-elect Donald Trump.

Below, Schaeffer's Quantitative Analyst Chris Prybal provides a chart with the 38 stocks on the S&P 500 Index (SPX) that have posted the best percentage returns since the election, as of Monday's close. At least 10 of these names are energy-related, a number of which appear poised to extend their post-election momentum. Two oil stocks we'll examine more closely below are Transocean LTD (NYSE:RIG) and National-Oilwell Varco, Inc. (NYSE:NOV).


best stocks since election dec 7

Since Election Day, RIG has roared to a more than 42% gain at $14.37, and yesterday touched an annual high of $14.44. In fact, over the past 20 sessions, the drilling services stock has outperformed the SPX by over 31 percentage points. But, from the looks of it, Wall Street still hasn't jumped on the bullish bandwagon.

For starters, over one-quarter of RIG's float is sold short, at nearly 94 million shares. Based on the stock's average trading rate, it would take more than one week to cover all these positions. Simply put, RIG could stand to benefit from a round of short-covering activity.

Separately, the vast majority of analysts are bearish toward Transocean LTD (NYSE:RIG). Specifically, 18 of 21 brokerage firms have doled out a "hold" or a "strong sell" opinion toward the outperformer, while its average 12-month price target of $9.82 is well below current levels. From a contrarian perspective, RIG could run higher on a round of upgrades and/or price-target hikes.

Shifting to NOV, the stock has shot over 22% higher since Election Day, last seen at $39.64. If that's not enough, the shares reached a 12-month high of $39.68 earlier today, and show no signs of slowing down.

A short-squeeze could help NOV extend its Trump rally. With close to 34 million shares sold short, it would take eight sessions to cover these bearish positions, based on the stock's average daily trading volume.

Not to mention, a round of upgrades and/or upwardly revised price targets could be in the cards. National-Oilwell Varco, Inc. (NYSE:NOV) has received "hold" or "sell" ratings from 17 of 23 analysts, despite its technical strength. Plus, the consensus 12-month price target of $32.47 sits at a roughly 18% discount to the current perch.

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