Hey everyone, I believe $FANG (Diamondback Energy) is set to outperform for the next 3-6 months.
First, if we compare $FANG to other oil stocks it looks undervalued, and it has better margins than its peers.
$FANG PB Ratio 1.3, Gross Margin 72%
$XOM PB Ratio 2.2, Gross Margin 30%
$EOG PB Ratio 2.2, Gross Margin 62%
Secondly, oil is poised for a bounce back. Oil sold off recently because of the MOU between Iran and the US, but global inventories are depleted and the supply from Gulf countries will not return as quickly as the market thinks. Supply and demand dictate that the oil price must go back up.
Additionally, the situation in the Strait of Hormuz is far from resolved, as ship operators are unwilling to enter and insurers avoid it completely. $FANG's operations are all safely insulated in West Texas, completely detached from Middle Eastern choke points.
You get the upside of the upcoming global oil shock with zero of the direct transit risk, and it's already great value here.