We're making a small contrarian buy as oil prices and energy stocks get crushed

A recent decline in oil prices has led to a challenging period for energy stocks, with U.S. oil prices falling below $70 per barrel for the first time since July. The commodity is on track for its seventh consecutive weekly loss, marking its worst performance since November 2018. As a result, energy is the only S&P 500 sector with negative quarterly performance. Despite these difficulties, experts believe that the decline in oil prices is not necessarily indicative of a more serious problem. The oversupply of oil has been a major factor contributing to the recent collapse, and historically, when oil prices drop below $70, OPEC and its allies tend to respond with more aggressive output cuts. Wall Street’s lack of interest in the energy trade has presented an opportunity for investors to purchase shares in well-managed companies with strong financials. Coterra Energy is a prime example of such a company. Although previous energy stocks in their portfolio were sold earlier this year, Jim Cramer’s Charitable Trust decided to invest in Coterra due to its reputation as one of the best operators in the industry. The company has demonstrated a commitment to increasing capital efficiency, allowing them to achieve higher production levels while maintaining or even reducing costs. Coterra’s capital efficiency was showcased in the third quarter when production exceeded expectations at a lower cost. Moreover, the company anticipates potential cost deflation of about 5% next year, further boosting returns. Coterra is a diversified producer, with approximately equal exposure to both oil and natural gas. This flexibility allows the company to adapt its operations to whichever commodity is more favorable. Investors who subscribe to the CNBC Club with Jim Cramer receive trade alerts before trades are made, and there is a waiting period before any transactions are executed. It is important to note that receipt of information from the Investing Club does not create a fiduciary obligation or duty, and there is no guarantee of a specific outcome or profit.