Investor interest in energy stocks may rise: HSBC

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SAN FRANCISCO (MarketWatch) -- "Big Oil" companies have been out of favor with investors, but their cash flow picture is more robust than they get credit for and investment sentiment may shift next year, HSBC said in a note Friday.

The sector is under-owned by large institutional investors that hold stocks for the long term, so "it may not need too much of a shift in sentiment towards the sector to prompt increased weightings," HSBC added.

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The U.S. Gulf Coast, home to the world's largest concentration of petroleum refineries, s suddenly awash in crude oil. Photo: Getty Images

The investment bank also started coverage of BP PLC (BP)  with a overweight rating. It's "close to the end of the rehabilitation period for BP following the Deepwater Horizon disaster," HSBC said in the note. Meeting long-term targets are now key to BP's share gains, the bank said.

HSBC also started Royal Dutch Shell PLC (RDS.A)  stock coverage with a overweight rating. Shells is a "good buy-and-hold stock for long-term investors, particularly those with a cautious market outlook," HSBC said. "On the other hand, even though Shell looks cheap (particularly after its latest falls), there is a risk it remains a value trap."

U.S.-listed shares of BP rose 0.8%, as most energy stocks on the S&P 500 ended up on Friday. U.S.-listed shares of Shell gained 2.9%.

More broadly, energy stocks tracked gains for equity markets on Friday, which emerged from a string of losses earlier this week on fears the U.S. Federal Reserve might start trimming its bond purchases soon.

Earlier Friday, the Labor Department said the U.S. gained 203,000 jobs in November, with strong hiring across sectors, and the unemployment rate fell to 7%, its lowest in five years.

Shares of Exxon Mobil Corp. (XOM)  rose 1.6%, while Chevron Corp. (CVX)  shares advanced 1%. Shares of ConocoPhillips (COP) , however, declined 0.1%.

Top gainers Friday included refiners Marathon Petroleum Corp. (MPC) , up 4%, and Tesoro Corp. (TSO) , with shares up 3.8%.

Among stocks in the red, Newfield Exploration Co. (NFX)  declined 4.5%.

The SPDR Energy Select Sector (XLE) , an exchange-traded fund focused on energy names, gained 0.3%.

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