The Organization of the Petroleum Exporting Countries (OPEC) just slashed oil production.
This isn’t great news for the White House or consumers, but there is a big winner:
Oil and gas stocks.
Using Chief Investment Strategist Adam O’Dell’s proprietary six-factor Stock Power Ratings system, I found a “Strong Bullish” company:
- It’s one of the largest owners of oil and gas mineral interests in the U.S.
- The company has a forward dividend yield of 9.8%!
- It rates 97 out of 100 on our Stock Power Ratings system.
The oil and gas stock I share today will benefit from this recent cut in oil production.
Here’s why.
Oil and Gas Stocks Are Already Winning
The Federal Reserve has battled inflation for months now.
Raising interest rates should slow economic growth and control inflation.
In normal times, those high interest rates would lead to a decline in oil prices.
But these aren’t normal times:
Since the start of the year, the Dow Jones U.S. Oil and Gas Index is up 44.8%!
Compare that to the S&P 500, which is down almost a quarter in the same time.
Bottom line: Certain oil and gas stocks already show “maximum momentum.”
The recent cut in oil production will carry these stocks even higher.
High Growth, Quality and Momentum: Black Stone Minerals LP
While OPEC’s 2% production cut won’t happen until November, certain oil and gas stocks are already seeing benefits as oil prices hit a three-week high after the announcement.
Black Stone Minerals LP (NYSE: BSM) owns and manages oil and natural gas interests across 41 states.
It’s one of the largest owners in the U.S.
The company started in 1876 and has royalty interests in almost 3.5 million acres.
Its massive portfolio has created steady revenue growth and great prospects for the future:
After a revenue drop in 2020, BSM’s total annual revenue jumped more than 70% last year.
By 2024, that number is expected to jump another 42.5%!
Let’s see how that has affected BSM stock’s recent performance.
BSM Blowing the Doors Off Its Peers
BSM stock has weathered the broader market downturn in spectacular fashion.
As I write this, the stock is up more than 50% in 2022.
Its peers are averaging a 26.8% decline over the same time.
BSM is considered an investment services stock, but because it focuses on oil and gas, it’s in the right place at the right time.
Black Stone Minerals LP Stock Power Ratings
Using Adam’s six-factor Stock Power Ratings system, BSM scores a 97 overall.
That means we’re “Strong Bullish” on this oil and gas stock and expect it to beat the broader market by at least three times over the next 12 months.
BSM’s Stock Power Ratings in October 2022.
BSM rates in the green on four of our six factors:
- Growth — BSM’s one-year annual earnings-per-share growth rate is 58.5%, and its sales growth over the last 12 months is 87.5%. Black Stone Minerals stock scores a 93 on growth.
- Momentum — BSM is up more than 30% since June. It scores a 93 on momentum.
- Quality — Black Stone’s returns on assets, equity and investment are all double digits compared to industry averages, which are low single digits. BSM scores an 89 on quality.
- Volatility — BSM is up 54.7% over the last 12 months with little downside. It scores an 81 on volatility.
BSM earns a “Neutral” 52 on value, but its price-to-earnings ratio is almost half the industry average.
It scores a “Neutral” 47 on size with a $3.6 billion market cap.
A neutral rating means the company is right in line with the market average.
Added bonus: BSM comes with a forward dividend yield of 9.8%.
That means shareholders earn a $1.69 dividend payment per share every year they hold the stock.
Bottom line: OPEC’s cut to global oil production may spell bad news for the White House.
But it’s great for holders of oil and gas stocks!
Black Stone Minerals has the largest oil and gas mineral portfolio in the U.S. and comes with a massive dividend.
This is why BSM is an outstanding oil and gas stock to have in your portfolio.
Safe trading,
Matt Clark, CMSA®
Research Analyst, Money & Markets
Matt Clark is the research analyst for Money & Markets. He is a certified Capital Markets & Securities Analyst with the Corporate Finance Institute and a contributor to Seeking Alpha. Before joining Money & Markets, he was a journalist/editor for 25 years, covering college sports, business and politics.
