Finding the right stock is the key to successful investing, but it’s never as easy as that sounds. The answer to the question, which stock to buy? is no secret, but it is hidden, in the avalanche of data that the markets produce. What’s needed is some clear signal that will cut through the noise and indicate the right stocks for the times.

The quantity of data, and the sheer impossibility of parsing all of it in real time, makes a formidable barrier to successful stock picking – but Wall Street’s analysts have that part under control, which turns the question into one that’s much more manageable: which analysts to follow? The quick answer is, follow the best analyst.

That brings us to Vincent Lovaglio, of Mizuho Securities, who currently holds TipRanks’ top ranking among more than 7,900 professional stock analysts. His top ranking is based on solid results: a 91% success rate to his stock picks, and a 46.6% average return to go with it.

In recent weeks, Lovaglio has picked out two stocks that he believes are primed for gains. According to TipRanks data, these are Strong Buy stocks, with double-digit upside potential; Lovaglio sees them gaining well over 30% in the coming months. Here are the details.

EOG Resources (EOG)

We’ll start with EOG Resources, an energy producer operating in hydrocarbon exploration and production, with its activities in some of the richest oil and natural gas fields in the US. EOG’s main operational area is in Texas-Louisiana-Oklahoma-New Mexico, where it has activities in the Eagle Ford shale, the Permian basin, the Anadarko basin, and the Barnett shale, as well as Colorado’s DJ Basin, Wyoming’s Powder River, and the Williston basin of Montana-North Dakota.

These varied activities generated a total 2Q22 production of 920.7 MBoed, well above both the guidance (895.7 MBoed) and the year-ago production (828 MBoed). Total revenue for the quarter came to $7.4 billion, with an adjusted net income of $1.6 billion, or $2.74 per adjusted share. The company reported $3 billion in cash and liquid assets and $5.09 billion in total debt.

EOG’s revenues have been climbing steadily over the past couple of years, and the company has benefited from both the return to regular business, and the increase in the prices of oil and natural gas.

In his coverage of this stock, top analyst Lovaglio writes, “We like that the company has the opportunity to differentiate on cost execution, with oil production growth largely on hold for now. We also favor the company’s increasing linkage of its natural gas volumes to international markets via agreements with Cheniere, which provides a potentially high margin outlet for its Dorado dry gas position. Additionally, with the company’s 2Q22 update, it announced initial success in its more oil-prone northern acreage in the Powder River Basin… we do believe that updates like these illustrate EOG’s higher capacity for organic inventory replenishment and a benefit of having invested relatively more at the bottom of the cycle in exploratory/appraisal drilling than peers.”

Unsurprisingly, Lovaglio gives EOG shares a Buy rating, and his $167 price target implies a one-year upside potential of ~37% for the stock. (To watch Lovaglio’s track record, click here)

Overall, this energy stock has 14 recent analyst reviews, which include 11 Buys against just 3 Holds, for a Strong Buy consensus rating. The shares are priced at $121.54 and their $150 average price target gives a one-year upside of 23%. (See EOG stock forecast on TipRanks)

Diamondback Energy (FANG)

Next up is another energy stock, Diamondback. This $24 billion hydrocarbon producer operates in the Permian basin of Texas, where its 2021 production averaged 375,000 barrels of oil equivalent daily. That has increased to 380,500 daily barrels of oil equivalent in 2Q22, and the company’s stock has clearly benefited; FANG shares are up 30% so far this year – far above the negative results of all the major indexes.

Additionally in the second quarter, cash flow from operations reached $1.7 billion, and free cash flow hit $1.3 billion. The company has a strong commitment to making capital returns to shareholders, and returned $837 million to shareholders in Q2, through both dividends and share repurchases. The company’s base dividend stands at 75 cents per common share, or $3 annualized, and FANG paid out a variable dividend in the quarter of $2.30 per share, for a total payment of $3.05. Taking the base and variable divs together, the payment yields a high 9%.

Lovaglio was impressed by Diamondback’s capital return policy, noting that it provides a solid income stream for investors. In his note on the stock, he writes: “FANG had announced an increase in its cash return framework to a 75% payout of free cash flow late June and followed up on that announcement with $3.05/sh dividends along with a $2.0Bn increase in the company’s repurchase authorization to $4.0Bn (~18% of market cap). The company also announced that it had repurchased 2.4Mn shares in 2Q for $303Mn and had already bought back 1.8Mn shares in 3Q for $200Mn. FANG differentiates itself vs peers by leading on costs and returns. A significant repurchase authorization reinforces this thesis.”

Based on the above, Lovaglio rates the stock a Buy, and has a $203 price target that indicates potential for 51% share appreciation in the coming year. (To watch Lovaglio’s track record, click here)

The 16 recent analyst reviews of Diamondback include 15 Buys that heavily overbalance the single Hold on the stock. FANG shares are currently priced at $134.01 and carries a $178.69 average price target, for a 33% upside potential in the next 12 months. (See Diamondback stock forecast on TipRanks)

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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