Strong Bullish Momentum in an Overlooked Oil Stock

My friend Greg is an interesting guy.

I met him while I was earning my master’s degree in politics at Johns Hopkins University. He was studying chemistry.

After we graduated, I went back to journalism, but his career path took a unique route.

He had job offers from pharmaceutical and chemical companies, but he wasn’t interested.

Being from Texas, he instead elected to work for an oil company on one of their offshore drilling rigs.

We reconnected recently, and he told me about his experiences on rigs in the Gulf of Mexico. The pay was great — especially if you counted all of the overtime — but the jobs were dangerous.

Working in the middle of nowhere — about 200 miles from the Gulf shore — where you rely only on the equipment you have and the person working next to you.

Greg told me that even the smallest malfunctioning valve can cause a massive shutdown, injury… and even death.

He said it’s easy for people to overlook how important oil drilling infrastructure is.

It got me thinking about what makes offshore drilling platforms work.

I found an interesting trend, and using Adam O’Dell’s proprietary Green Zone Power Ratings system, I found a stock with a significant upturn in momentum that is worth a look for your portfolio.

Oil and Gas Infrastructure Market Rising

An offshore oil rig is more than just a massive drill bit sunk into the ocean floor.

Pipes, valves, refining products and storage are all part of oil and gas infrastructure.

And business is booming:

The size of the global oil and gas infrastructure market was $706.9 million in 2023. By the end of 2032, the market is expected to reach $1.2 billion — that’s a 74% increase!

The market is set to grow at a compound annual growth rate of 6.35% from 2023 to 2032.

Adam has mentioned the transition away from traditional fossil fuels will take a lot of time to complete, meaning our dependence on oil and gas won’t go away soon.

Seeing this trend in oil and gas infrastructure, I used his Green Zone Power Ratings system and found a stock with a significant surge in momentum and a high overall rating worth looking at.

Green Zone Power Ratings on 1 Oil Stock: DNOW Inc.

I pinpointed DNOW Inc. (NYSE: DNOW) using our system.

DNOW's Green Zone Power Ratings in March 2024.

DNOW specializes in distributing products for industrial applications, like pipe fittings, gauges, pipes, repair parts and power transmission equipment.

The stock rates 93 out of 100 on the Green Zone Power Ratings system. That means we are “Strong Bullish” on it and expect it to outperform the broader market by 3X over the next 12 months.

Its 98 on Value comes in part from a price-to-earnings ratio of 6.3 — which is half the industry average. The stock’s price-to-cash flow and price-to-book value are also half its peer average.

The stock earns a “Neutral” 50 on Momentum, but its price movement from the middle of February is worth noting:

DNOW Stock Up 48% From February 2024 Lows

After hitting a low of around $9 on February 14, the stock took off… with a 48% rise off that low.

That price jump is thanks to DNOW beating earnings expectations in its fourth-quarter 2023 earnings report. The company reported earnings per share of $0.22 on $555 million in revenue against expectations of $0.16 earnings on $540 million in revenue.

As Chad Stone touched on Friday, this was one of those massive earnings beats that created a bullish rally in the stock.

Bottom line: My friend Greg relied on his fellow rig workers and the equipment they used while working 200 miles off the coast.

The market for oil and gas infrastructure products is on the rise, but only reliable equipment will suffice.

An outstanding earnings report tells me there is trust in the products DNOW provides. That means demand should be strong for years to come.

Couple that with “Strong Bullish” Green Zone Power Ratings, and DNOW is a compelling stock to look at for your portfolio.

Until next time…

Safe trading,