2012's Big Trade? How to Invest in Oil's Rapid Rise

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Oil prices gained for a fourth day after U.S. crude supplies dropped the most in a decade. Bloomberg reports that Energy Department data showed stockpiles fell 10.6 million barrels, the largest decrease since February 2001.

As a result, futures rose as much as 0.7% after gaining 1.5% on Wednesday. "New York oil will average a record $100 a barrel next year as the U.S. averts recession, while London-traded Brent will decline from the 2011 mean, according to a Bloomberg News survey of analysts."

Thursday's crude prices for February climbed $0.72 to $99.39 per barrel on the New York Mercantile Exchange. This is up from Wednesday, when contracts increased by $1.43 to $98.67 per barrel.

Overall, crude prices have risen 8.5% this year after climbing 15% in 2010. Prices are up 25% this quarter alone, the biggest gain since the second quarter of 2009.

Investing ideas
So we were wondering, which oil companies have been boosted by bullish sentiment?

To create this list, we started with a universe of about 150 high growth oil companies. To refine the list, we collected data on institutional transactions, and identified the names that have seen significant inflows during the current quarter.

And to further refine the list, we collected data on short-seller trends, and identified the names that have seen a significant decrease in shares shorted during the current month (i.e., short-sellers think the upside of these stocks outweighs the downside)

Sophisticated investors, like hedge fund managers and short-sellers, think these names are going higher -- do you agree?

List sorted by projected earnings growth. (Click here to access free, interactive tools to analyze these ideas.)

1. Gulfport Energy (NAS: GPOR) : Develops, and produces oil and gas in the Louisiana Gulf Coast. Wall Street analysts expect the company's earnings to grow by 43.50% over the next five years. Net institutional purchases in the current quarter at 7.4M shares, which represents about 17.09% of the company's float of 43.29M shares. Shares shorted have decreased from 4.23M to 3.67M over the last month, a decrease which represents about 1.29% of the company's float of 43.29M shares.

2. Approach Resources (NAS: AREX) : Engages in the acquisition, exploration, development, and production of oil and gas properties in the United States. Wall Street analysts expect the company's earnings to grow by 34.40% over the next five years. Net institutional purchases in the current quarter at 3.3M shares, which represents about 13.24% of the company's float of 24.92M shares. Shares shorted have decreased from 6.39M to 5.59M over the last month, a decrease which represents about 3.21% of the company's float of 24.92M shares.

3. Rex Energy (NAS: REXX) : Operates as an independent oil and gas company in the Appalachian, Illinois, and Denver-Julesburg Basins. Wall Street analysts expect the company's earnings to grow by 33.60% over the next five years. Net institutional purchases in the current quarter at 3.7M shares, which represents about 10.67% of the company's float of 34.69M shares. Shares shorted have decreased from 10.74M to 10.31M over the last month, a decrease which represents about 1.24% of the company's float of 34.69M shares.

4. GeoResources (NAS: GEOI) : Engages in the acquisition, reengineering, development, and exploration of oil and gas reserves in the Southwest, Gulf Coast, and the Williston Basin areas of the United States. Wall Street analysts expect the company's earnings to grow by 23.53% over the next five years. Net institutional purchases in the current quarter at 900.9K shares, which represents about 4.54% of the company's float of 19.83M shares. Shares shorted have decreased from 3.64M to 3.36M over the last month, a decrease which represents about 1.41% of the company's float of 19.83M shares.

5. Hornbeck Offshore Services (NYS: HOS) : Operates offshore supply vessels (OSVs), multi-purpose support vessels, and a shore-base to provide logistics support and specialty services to the offshore oil and gas exploration and production industry primarily in the United States and Gulf of Mexico. Wall Street analysts expect the company's earnings to grow by 17.63% over the next five years. Net institutional purchases in the current quarter at 1.6M shares, which represents about 6.55% of the company's float of 24.43M shares. Shares shorted have decreased from 6.54M to 6.14M over the last month, a decrease which represents about 1.64% of the company's float of 24.43M shares.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.


List compiled by Eben Esterhuizen, CFA. Kapitall's Eben Esterhuizen and Rebecca Lipman do not own any of the shares mentioned above. Institutional data sourced from Fidelity, Short data sourced from Yahoo! Finance.

At the time this article was published Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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