What happened

Legacy Reserves (NASDAQ:LGCY) continued its torrid run on Wednesday, rising another 20% by 12:45 p.m. EDT after one of the company's largest investors revealed the purchase of additional units. That brings the oil and gas producer's year-to-date rally up over 250% as fears concerning its future have quickly faded alongside higher oil prices.

So what

Bain Creek Capital disclosed that it had purchased another 80,000 units in Legacy Reserves for about $445,000. That adds to Bain Creek's position, which is currently more than 10% of the company's outstanding units after it has bought more than 550,000 units since late March. These purchases seem to indicate that Bain Creek sees more upside ahead as Legacy Reserves converts from a master limited partnership to a C-Corp.

An oil pump with the sun bursting behind it.

Image source: Getty Images.

Bain Creek Capital isn't the only one that sees upside in Legacy Reserves as UBS recently upgraded the company from sell to hold. While that might not seem all that bullish, UBS also raised its price target from $1.50 to $8 per unit, which implies 37% upside even after today's 20% pop.

Now what

While some investors and analysts see more upside ahead for Legacy Reserves, this is still a very risky oil stock. It's a small company that has an elevated level of debt. Because of that, shares could be quite volatile going forward, especially if oil prices give back some of their recent gains. That's why investors might want to consider one of these top-tier oil stocks instead.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.