As oil prices rise, so does this market leader.

Bill Gunderson
Posted: Sep 06, 2013 12:01 AM
As oil prices rise, so does this market leader.

Crisis at home. Crisis abroad. In other words, business as usual at the markets.

Another reminder that successful investors do look at stock markets. They look at a market of stocks. And no matter what is happening with Syria, the debt ceiling and the Fed taper, some stocks are going to thrive. Some not.

That is why it is important every day to watch your individual holdings whatever they may be.

During this past week I have continued to check my holdings on a daily basis and buy and sell stocks as I see fit. I have sold a few weak links that weren’t doing well in spite of a strong market because why would they do well in a weak market?

At the same time, this week I have seen some stocks that made my eyeballs pop out of my head and I added them to my portfolio!

Something else wild happened this past week—oil is now trading at $108 per barrel! It’s been a long time since I’ve seen oil trade at this price, and, as a result, the oil-related asset class is thriving. You could buy Chevron (CVX) or Exxon Mobil (XOM), but their respective performance pales in comparison to a much younger, more aggressive, oil-related company.

Data from Best Stocks Now App

EOG Resources has been one of my favorite stocks in the oil patch over the years. It is now a $43 billion large cap company headquartered in Houston, TX. EOG engages in the production and marketing of crude oil and natural gas in the U.S., Canada, Trinidad, the U.K., and China.

In other words, EOG has a much diversified portfolio. But this is not the first time EOG is flourishing—it has had some pretty good numbers over the years!


Data from Best Stocks Now App

Let’s take a look at how EOG has done for its shareholders over the years. In the past 10 years, EOG has delivered an average of 22.8 percent total return per year to its investors.

Over the last three years, EOG has delivered 22.3 percent per year while the market has delivered about 16 percent per year.

Over the last 12 months EOG is up 49.2 percent while the market is up 16.7 percent.

In fact, over the past three months, this stock is up 18.5 percent while the market is DOWN 1.3percent! So EOG gets very good momentum and performance grades as compared to other 3,500 investments that I track on a daily basis.

I love stocks that are performing for its shareholders because that tells me there is probably good management at the company.

And while the CEO is probably doing quite well himself, he’s also doing quite well for his shareholders. It’s hard to be an angry shareholder when the CEO is making money for you! In my mind that’s the number one job of a CEO—to treat their shareholders with some good returns over the years.


How about the valuation of EOG? Just like I’ve seen a lot of cheap stocks that don’t have good performance, I’ve also seen a lot of stocks flying around with great performance, but trading at astronomical prices. This scares me!

I was around in 2000 when the high-flying dot com stocks were trading at triple digit PE ratios and crashing back to earth, so I pay keen attention to valuation!

Data from Best Stocks Now App

EOG is currently trading at 17.8 times forward earnings. The market is currently trading at an average of about 18 time’s forward earnings, so EOG is trading at a slight discount to the overall market.

When I take EOG’s earnings estimates of $8.83 per share for the next year, extrapolate that out over the next five years at annual estimated growth rate of 18 percent, and apply a multiple that I think is appropriate, I find a stock that still has 85 percent upside potential!

Stock chart

Lastly, let’s not forget to check EOG’s one-year stock chart. I’m looking for a stock that is not falling, in a sideways trend, or starting to rollover! When we look at EOG, we see a very strong stock chart!

It is very important to always be in the right area of the market at the right time. I don’t think there is anyone out there who has been an investor and hasn’t been caught in the wrong place at the wrong time. With oil prices rising fast, the energy stocks look very good once again!

Out of 3,513 investments that track on a daily basis, EOG comes in at number 61 in my overall ranking. This ranking takes into account the stock performance, valuations and stock chart.

The stock also earns a Gunderson Grade of A which places in the top 5% of the entire investment world.

Clients of Gunderson Capital Management are currently long the stock.

Data from Best Stocks Now App

Follow me on Twitter @billgunderson for a change in my opinion of this stock.