MPC Marathon Petroleum Corp. Common Stock

The stock rally we've seen over the last six months has lifted all boats. It hasn't been a stock pickers market. It's the type of market where no matter what you've bought you've made money.

If you're a value investor, you're suddenly wondering, "where's the good value stocks?" Many of the previously "cheap" stocks aren't so cheap anymore. Many sectors have had big run-ups.

But if you dig deep, value stocks are still out there.

Not only that, there are value stocks that are expected to grow earnings by the double digits this year. That's the magic combination for investors: value AND growth.

How Do We Find Stocks With The Magic Combination?

In a stock market where the rally is lifting all boats, we have to look in sectors that remain out of favor. Yes, there still ARE some areas that haven't performed quite as well as others.

One area investors have turned their backs on is energy.

Outside of the refiners, which have soared over the past year due to record high crack spreads which have pushed up earnings and shareholder payouts, much of the rest of the energy sector has been left on the sidelines. Some companies, like the integrated big oil companies, for instance, are lagging the overall markets. Many of the exploration companies have also yet to break out. Ditto with the oil services and equipment companies.

But as Wall Street shuns energy, that creates an opportunity for investors. A lot of energy companies are trading with low P/Es. Additionally, there are a select few that are also expected to grow earnings by the double digits in 2013. These companies are being lumped in with all the other energy companies in the "bad" category.

Using the Zacks Rank, I also looked for energy plays that had the magic combination of value AND growth. That means stocks with forward P/Es under 10 and double digit earnings growth expected in 2013. They DO exist.

3 Energy Stocks With The Magic Combination

Marathon Petroleum (MPC)

Marathon Petroleum was spun off from Marathon Oil in July 2011. It owns 7 refineries in the Gulf Coast and Midwest and distributes refined products.

Most of the refining stocks rallied big in 2012 and have continued that rally again into 2013. But the analysts still like Marathon mainly due to its position with both Midwest and Gulf Coast refineries. It's going to be able to play the North American crude dynamics, instead of the WTI crude spread that many other refiners have been tied to. It has been cashing in on discounted heavy Canadian crudes.

The Magic Combination

Forward P/E = 8
2013 Expected Earnings Growth = 11.2%
PEG ratio = 1.1
Zacks Rank #1 (Strong Buy)

Transglobe Energy Corporation (TGA)

Transglobe Energy is a Canadian exploration and production company with interesting ins Egypt and Yemen. It has 9 international blocks with active exploration and development drilling already underway.

In Egypt it has a 50-100% operated and non-operated interest in 5 concessions in Egypt. In Yemen, it has a 13-25% working interest in several blocks.

For exploration companies, it's all about getting it out of the ground. Production grew by 44% in 2012 to 17,496 barrels of oil per day ("Bopd") from 12,132 Bopd.

Transglobe is bullish on 2013 with production expected to rise another 28% to a range of 21,000 to 24,000 Bopd.

The Magic Combination

Forward P/E = 6.4
2013 Expected Earnings Growth = 20.5%
PEG ratio = 0.2
Zacks Rank #2 (Buy)

Ensco plc (ESV)

Ensco operates 76 offshore rigs mainly in the Gulf of Mexico and the North Sea. Headquartered in London, its fleet includes 7 ultra-deepwater drillships, 13 semisubmersibles, 7 moored semisubmersibles and 49 jackups.

Offshore drilling has been hot. Ensco said it received 60 inquiries for jackups and floaters in the fourth quarter but it couldn't bid on 25% of the business due to lack of rig availability.

Analysts, and the company, are optimistic about 2013. Ensco just raised its dividend by 33% to $0.50 per quarter. That's a yield of 3.5%.

The Magic Combination

Forward P/E = 8.5
2013 Expected Earnings Growth = 24%
PEG ratio = 0.3
Zacks Rank #3 (Hold)

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Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Turnaround Trader and Value Investor services. You can follow her on twitter at @TraceyRyniec.

 
ENSCO PLC (ESV): Free Stock Analysis Report
 
MARATHON PETROL (MPC): Free Stock Analysis Report
 
TRANSGLOBE ENGY (TGA): Free Stock Analysis Report
 
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