Hess Corporation Stock Peaked Ahead Of OPEC Meet?

by Trefis Team
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The shares of Hess Corporation (NYSE: HES) have recovered to pre-Covid levels driven by the surge in benchmark prices and a strong balance sheet. In 2020, the company’s revenues and earnings were propelled by a sizable hedge position – resulting in strong cash generation and supporting dividend payouts. After guiding for 0.5 mb/d production increase in January, OPEC announced Saudi Arabia’s additional production curtailment of 1 mb/d in February. Given the quick recovery in benchmark prices this year, there is a strong likelihood that OPEC will guide for an increase in crude oil production at its upcoming meeting on March 4 – triggering a correction in benchmark prices. Thus, Trefis believes that Hess Corporation stock has reached its near-term potential.

But how would these numbers change if you are interested in holding Hess Corporation stock for a shorter or a longer time period? You can test the answer and many other combinations on the Trefis Machine Learning Engine to test Hess Corporation stock chances of a rise after a fall. You can test the chance of recovery over different time intervals of a quarter, month, or even just one day!

MACHINE LEARNING ENGINE – try it yourself:

IF HESS stock moved by -5% over 5 trading days, THEN over the next twenty-one trading days, HESS stock moves an average of 2.6 percent, which implies an excess return of just 0.8 percent compared to the S&P 500.

More importantly, there is 57% probability of a positive return over the next twenty-one trading days and 51% probability of a positive excess return after a -5% change over five trading days.

Some Fun Scenarios, FAQs & Making Sense of Hess Stock Movements:

Question 1: Is the average return for Hess stock higher after a drop?

Answer:

Consider two situations,

Case 1: Hess stock drops by -5% or more in a week

Case 2: Hess stock rises by 5% or more in a week

Is the average return for Hess stock higher over the subsequent month after Case 1 or Case 2?

HES stock fares better after Case 1, with an average return of 2.6% over the next month (twenty-one trading days) under Case 1 (where the stock has just suffered a 5% loss over the previous week), versus, an average return of 1.1% for Case 2.

In comparison, the S&P 500 has an average return of 3.1% over the next twenty-one trading days under Case 1, and an average return of just 0.5% for Case 2 as detailed in our dashboard that details the average return for the S&P 500 after a fall or rise.

Try the Trefis machine learning engine above to see for yourself how Hess stock is likely to behave after any specific gain or loss over a period.

Question 2: Does patience pay?

Answer:

If you buy and hold Hess stock, the expectation is over time the near term fluctuations will cancel out, and the long-term positive trend will favor you – at least if the company is otherwise strong.

Overall, according to data and Trefis machine learning engine’s calculations, patience absolutely pays for most stocks!

For HES stock, the returns over the next N days after a -5% change over the last five trading days is detailed in the table below, along with the returns for the S&P500:

Question 3: What about the average return after a rise if you wait for a while?

Answer:

The average return after a rise is understandably lower than a fall as detailed in the previous question. Interestingly, though, if a stock has gained over the last few days, you would do better to avoid short-term bets for most stocks – although HES stock appears to be an exception to this general observation.

HES’s returns over the next N days after a 5% change over the last five trading days is detailed in the table below, along with the returns for the S&P500:

It’s pretty powerful to test the trend for yourself for Hess stock by changing the inputs in the charts above.

With Hess stock being a somewhat risky bet at current levels, 2020 has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how the stock valuation for Atmos Energy vs. World Wrestling Entertainment shows a disconnect with their relative operational growth. You can find many such discontinuous pairs here.

See all Trefis Price Estimates and Download Trefis Data here

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