The five-day carnage on the Street starting last week saw the Dow Jones Industrial Average plunge a whopping 4.14%. The most obvious conclusion is that the market is undergoing a correction following a three-month rally that started at the turn of the year.
But some believe that this might not be the case. Investors who relied on strategies that worked in the past might not be able to reap similar gains this time. While there is merit in the above conclusion, this isn't necessarily applicable to every industry. For instance, the average drop last week for nearly 200 stocks in oil exploration and production was about 5%. Now this kind of a drop, I believe, may have been overdone. With crude oil trading at $103 per barrel and no obvious signs of a shortfall in crude oil demand, exploration and production companies with strong fundamentals should inevitably recover.
Here are five exploration and production stocks that, I believe, should make a strong recovery following last week's thrashing:
Samson Oil & Gas
- Add Samson Oil & Gas to your watchlist.
- Add Occidental Petroleum to your watchlist.
- Add McMoRan Exploration to your watchlist.
Penn West Petroleum
- Add Penn West Petroleum to your watchlist.
And natural-gas prices aren't going to stay at current levels for a long time. Dan points out that demand will eventually rise. Prices in the range of $5 to $6 per Mcf will be hugely profitable for Ultra Petroleum. Analysts have put a price target of $32 on this stock, which is currently trading around $18.
- Add Ultra Petroleum to your watchlist.
Foolish bottom line
These companies have sound business fundamentals, which is what makes me bullish about them. Eventually, that's more important than short-term market-driven sentiments. However, if you're looking for one energy stock, we've got a stock idea that could knock your socks off. Read about it right here in The Motley Fool's special free report on the energy industry and its best prospects. It's free for a limited time, so click here today.
Fool contributor Isac Simon does not own shares of any of the companies mentioned in this article. The Motley Fool owns shares of Ultra Petroleum. Motley Fool newsletter services have recommended buying shares of Ultra Petroleum. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.