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The Bottom Is in for These 3 Stocks? Analysts Say ‘Buy’

Markets thrive on risk, but risk is hard to talk about. It’s easy to fall back on cliches – buy low and sell high, or the bulls and bears make money while the pigs get slaughtered – but those cliches have drifted into common parlance for a reason. They have a grain of truth.Buying low and selling high has always been known as the way to make a profit, from the earliest days of human barter. And whether the market is moving up or down, whether investors follow a bullish or a bearish strategy, it’s possible to turn that profit.So, let’s talk about buying low. While the overall market has recovered nicely from the pandemic swoon of mid-winter, many stocks are still struggling with a depressed share value. Some of them are fundamentally sound – and Wall Street’s analysts have taking note.Using TipRanks database, we pinpointed three such stocks. Each is down at least 60% so far this year, but each also has a Strong Buy consensus rating and at least 40% upside potential for the coming months.Diamondback Energy (FANG)First up is Diamondback Energy, a Texas oil company that has been part of the Permian Basin boom which put Texas once again at the forefront of the North American oil industry. Diamondback is a smaller player in its industry and its operations are entirely within the Permian, where it is producing some 170,000 barrels of oil daily. While this number is up 40,000 barrels from the springtime, Diamondback has been hit hard by low oil prices in recent months and the stock is down 68% year-to-date.The low prices on the open oil market have impacted Diamondback’s bottom line, and earnings have been falling steadily from their $1.93 per share peak in 4Q19. The 1Q20 EPS was $1.45, while Q2 earnings came in at just 15 cents. The company is set to release third quarter figures on November 3, and the outlook calls for 37 cents – an improvement, but still down. However, it’s important to note here that Diamondback has beaten the earnings forecasts in the last three quarters.On a more positive note, company management points out that despite recent low earnings, FANG was able to end Q3 without touching its revolving credit facility – and that the company has over $2 billion in liquid assets available. Combined with rising production, this gives the company a solid footing.JPMorgan analyst Arun Jayaram, looking at the Texas oil sector and Diamondback’s place in it, sees the company as well-positioned to survive in a low-price environment. “We have consistently viewed FANG as one of the top-tier operators in the industry, and given the recent weakness in oil prices, the mgmt. team has made the prudent decision to sharply reduce activity levels. Given a focus on continuous cost reduction, we believe the company has the inventory depth and balance sheet strength to be a relative outperformer through the downturn,” Jayaram wrote.Jayaram rates FANG shares an Overweight (i.e. Buy), and his $48 price target suggests a 68% upside potential by next year. (To watch Jayaram’s track record, click here)Overall, the Strong Buy consensus rating on FANG is based on 11 recent Buys against a single Hold. The stock is selling for $28.58 per share, and its $52.10 average price target is even more bullish than Jayaram’s, implying an upside of 82%. (See FANG stock analysis on TipRanks)ChampionX Corporation (CHX)Next up is ChampionX, an oilfield technology company acquired its current name this past summer, through the merger of Apergy Corporation and ChampionX Holdings. The combined company kept Apergy’s trading history, and took on the new ticker, CHX. This is a midstream company with operations in the drilling, production, pipeline, and water technology segments of the oil industry. It’s a diversified portfolio of operations that gives ChampionX plenty of room to maneuver in a bearish oil market.ChampionX may need all of that maneuvering room, as the shares are down 76% this year. As with Diamondback, the chief culprit is low oil prices cutting into profit margins. Even though, as a midstream and service company, ChampionX does not directly pull the oil out of the ground and sell it, its operations are tied to the end users’ purchase price. In 2Q20, EPS turned sharply negative with a 43-cent per share net loss. This comes even as revenues rose in Q2, to $298 million.Scotiabank analyst Vaibhav Vaishnav sees CHX in a good place after improving its positioning as a services company.“With the merger with Ecolab’s Upstream business, CHX is now among the top two players in the production chemicals business. This business is relatively very stable as it focuses on production rather than drilling and completions activity. Essentially,…