Top Picks 2016: EQT Corporation
01/21/2016 7:00 am EST
I like buying companies that are on sale and no sector is currently at a deeper discount than the energy sector, asserts Robert Rapier, editor of Energy Strategist.
The sell-off that started in mid-2014 has created some legitimate bargains amongst the carnage. An investor has to be selective, however, as some companies are still overvalued despite the sharp corrections.
But I believe that the biggest growth stock bargain in the energy sector at present is EQT Corporation (EQT), a leading Marcellus driller with extensive holdings in the basin’s liquids-rich sweet spot.
EQT has seen its realized price premium shrink alongside the price of natural gas liquids. Yet it continues to rapidly ramp up production, making up some of the price pain on volume.
EQT is also an enthusiastic developer of affiliated income vehicles, spinning out first its midstream operations and then its general partner interests in those as separate securities.
These interests and EQT’s strong balance sheet give the company an advantage over some of its Marcellus competitors and should keep them afloat until domestic natural gas prices recover.
EQT will be a major beneficiary of the eventual recovery in prices, not least because its midstream MLP is getting an increasing share of its pipeline traffic from other nearby producers.