Using the Energy Select Sector SPDR ETF (NYSEARCA:XLE) as a barometer, it's accurate to say oil stocks are enjoying a near-term renaissance. XLE, the largest exchange-traded fund dedicated to the energy sector, climbed 24% higher this month.That's undeniably good news, although recent price action has shaken up the chart. But this news isn't perfect. The issue is the point from which oil stocks are rallying, and how much more work they have to do. Year-to-date, each of the 10 worst-performing ETFs either have some oil exposure or are directly linked to crude.With prices still low and demand only recently showing signs of life, the energy sector still has a lot of work to do to reclaim lost glory. Another issue to consider is the resiliency of some energy companies. No, the likes of Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX) aren't on the brink. But some energy producers are.InvestorPlace – Stock Market News, Stock Advice & Trading Tips * 7 Great Biotech Stocks to Buy and Hold Now Here are seven oil stocks investors should sell now. * Chesapeake Energy (NYSE:CHK) * Apache (NYSE:APA) * Callon Petroleum (NYSE:CPE) * Extraction Oil & Gas (NASDAQ:XOG) * Gulfport Energy (NASDAQ:GPOR) * Nabors Industries (NYSE:NBR) * SM Energy (NYSE:SM) Oil Stocks: Chesapeake Energy (CHK)Source: Casimiro PT / Shutterstock.com Chesapeake Energy has been making some jaw-dropping moves higher. That makes it difficult to say the stock should be shorted from here. Add to that, this oil stock notched a roughly nine-fold jump off its 52-week low.Like some of the other beaten-up names in the energy patch, Chesapeake got a lift on news that OPEC agreed to a production cut. Those headlines are always catalysts for oil equities. But the trick is getting all the cartel's member states to actually comply.OPEC cuts are not enough to eradicate Chesapeake's mountain of liabilities and the issue of an imminent bankruptcy filing. When it comes to ability to survive, this is one of the more challenged names in the sector. And, if a Chapter 11 filing happens, Chesapeake becomes beholden to creditors while common equity investors get wiped out. Apache (APA)Source: JHVEPhoto / Shutterstock.com Exploration and production firm Apache is another oil stock that's notching a stunning rally. In this case, the stock more than quadrupled in less than three months. The chart indicates if the 200-day moving average is taken out, more upside is available.Apache isn't anywhere close to as imperiled as Chesapeake is, but in this environment, credit is leading equity. What that means is that companies need to oblige bondholders with better cash flow and stronger balance sheets. Moody's Investors Service has some doubts about Apache, as highlighted by a recent downgrade that took the energy producer into junk territory."The downgrade of Apache to Ba1 reflects our expectation of higher leverage on production and reserves that we don't expect to reverse over the medium term," said Pete Speer, Moody's Senior Vice President. "The company's returns and cash flow based leverage metrics will improve in line with the recovery in oil prices, but those metrics position Apache more in line with Ba1 rated E&P peers." Callon Petroleum (CPE)Source: Pavel Kapysh / Shutterstock.com Callon Petroleum is another prime example of the dash for trash currently underway in the energy sector. The stock more than doubled over the past week and is up more than six-fold from its March lows. All that good work — to become barely better than a $2 stock. Decide what you want: three shares of Callon or a trip to Starbucks (NASDAQ:SBUX).Jokes aside, the New York Stock Exchange warned Callon about its sub-$1 share price in April, meaning another big down move could result in a reverse split.Like so many energy names in 2020, the story with Callon largely revolves around cutting costs and bolstering the balance sheet. Cost-cutting for many of these companies was necessary, but what it necessitates dialing back on exploration and production. Restarting production in shale plays isn't easy. It's not like turning a light on, which makes it difficult for operators to rapidly take advantage of rising oil prices. Extraction Oil & Gas (XOG)Source: Shutterstock Extraction is an oil and natural gas producer primarily operating in Rocky Mountain-area shale plays. And XOG stock more than doubled in early June, bringing it back above $1 a share.However, viability is a real concern — especially as shares have already started to head south.As noted above with Apache, credit is taking on added importance in this climate, and when it comes to Extraction's credit profile, it's rather bleak. In fact, time is running out for the company to avoid default.A recent downgrade by Moody's of Extraction to C "follows Extraction's election to skip its May 15 interest payment on its 2024 senior unsecured notes as the company evaluates strategic options to restructure its capital structure and bolster its liquidity," said John Thieroff, Moody's senior analyst. "If the company fails to cure the missed interest payment within the 30-day grace period, it will be in default."Ratings in the C spectrum imply elevated risk of default. Gulfport Energy (GPOR)Source: Shutterstock Recent strength in Gulfport Energy is legitimate on the back of the aforementioned OPEC supply cuts and the company's own efforts to conserve capital. The company's strategy is now to push off output into the latter stages of this year and into 2021 to capitalize on what it hopes will be higher energy prices."As it relates to our outlook for 2021, under a maintenance level program, we would expect to invest approximately $300 million of capital spend to maintain a similar level of year over year production," said Gulfport President and CEO David Wood.The strategy is reasonable, but with that and OPEC cuts baked into this stock, near-term catalysts are limited to higher oil demand and prices. Additionally, given the gas-intensive nature of Gulfport's production stream, it would take a hotter-than-expected summer for prices to rally.All of that is to say this remains a risky stock. Nabors Industries (NBR)Source: Novikov Aleksey / Shutterstock.com Don't be fooled by the nearly $84 price Nabors Industries hit earlier in June. That's the handiwork of a reverse split implemented in April — one that was necessary because oil services stocks, like NBR, are highly correlated to crude prices.To its credit, Nabors is implementing an array of cost-cutting measures, including reductions in executive pay and capital spending as well as suspension of its dividend.Here's what makes this a risky near-term idea. With so many producers cutting exploration budgets, demand for the goods and services offered by oil services companies is bound to wane. It could take a sustained oil bull market to bring some of that need back online. SM Energy (SM)Source: Shutterstock SM Energy is yet another example of a rallying oil stock with dreadful credit fundamentals. Last month, the company said it's issuing new debt, exchanging new bonds for old ones at a 35% to 50% discount to par, meaning investors holding SM's old bonds are taking quite a haircut.How does a company compel a creditor to take what appears to be a lousy deal? Often by offering convertible notes, which can later be converted into common stock. Great for the bondholders, assuming the stock appreciates, but bad for equity investors because the influx of new shares dilutes previous shareholders.All of this financial engineering, which SM is within its rights to orchestrate, landed the company with a Caa1 credit rating. That's simply terrible.Todd Shriber has been an InvestorPlace contributor since 2014. As of this writing, he did not hold a position in any of the aforementioned securities. More From InvestorPlace * Why Everyone Is Investing in 5G All WRONG * Top Stock Picker Reveals His Next 1,000% Winner * The 1 Stock All Retirees Must Own * Look What America's Richest Family Is Investing in Now The post 7 Oil Stocks That Are Struggling to Survive appeared first on InvestorPlace.
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Causeway International Value Fund Portfolio Manager Sarah Ketterer joins Yahoo Finance’s On The Move panel to discuss the outlook for markets as the major indexes claw back from Thursday’s selloff.Speculators that bet on airline stocks bottoming in March needed to wait until last week for the trade to pay off. The encouragement that flight bookings and passenger traffic are on the rise rewarded Delta Airlines (NYSE:DAL) shareholders. DAL stock also has valuations are too compelling to ignore. This might explain why the recent rally unfolded.Source: Markus Mainka / Shutterstock.com What about Delta's fundamentals? The near-term prospects still look poor, even if bookings are slowly improving. DAL Stock Lifted by Flight ScheduleIn early May, Delta consolidated various operations in the U.S. served by multiple airports. This will align flight supply with weaker demand but would maintain the airliner's connectivity. The company already planned to add more flights to its Atlanta and New York schedule. It also planned to increase its services in the Caribbean and Latin America. But most importantly, Bill Lentsch, Delta's chief customer experience officer, said that "our survey data showed a clear desire for these kits and we have a bias toward action when we see new trends emerge."InvestorPlace – Stock Market News, Stock Advice & Trading TipsThe inevitable rebound in passenger flight volumes, even though they are at a fraction of last year's level, will introduce a big problem for air carriers. Travelers will have to wear a mask while onboard but maintaining social distancing will still present a challenge for everyone. Delta may lead the initiative in keeping planes disinfected between flights. For example, it may use ultraviolet light and scrub down the interior of the plane. Airline staff will wear protective gear and masks at all times and minimize close contact with passengers. Excessive SpeculationThe 88% bounce in LATAM Airlines (NYSE:LTM) last week suggests that excessive speculation in the sector lifted values only for now. Amateur stock buyers who do not know what a bankruptcy means bought LTM stock. When the firm files for bankruptcy, shareholders will get nothing back. Conversely, markets may be speculating that a delay in the filing, to at least July, increases the odds of a bailout from Brazil. Still, Brazil's currency is collapsing and the country has too much debt to help the airline. * The 9 Best Cryptocurrencies to Watch for the Rest of 2020 Delta and the Brazilian carrier signed a trans-American joint venture agreement earlier in May. The deal gives its customers connected flights between Delta and LATAM flights in hub airports where the two carriers are co-located. ValuationWall Street analysts have a $36 price target on Delta stock (per Tipranks). Supporting that price target is the stock's deep value score of 88/100:DAL Industry S&P 500 Value Score 88 70 73 Price / Earnings 6.4 – 27.5 Price / Sales 0.5 0.3 2.3 Price / Free Cash Flow 9.5 10 21.9 Price / Book 1.5 1.3 3.8 Data courtesy of Stock RoverEven after last week's sharp bounce, Delta trades at a steep discount compared to the S&P 500 index. The stock market is still pricing in a weak recovery in revenue and investors expect the company to continue losing money. The stock is of high quality, although gross margins trail the index.DAL Industry S&P 500 Quality Score 82 55 79 Gross Margin 19.90% 20.80% 29.10% Operating Margin 11.50% 6.10% 13.20% Net Margin 7.80% 1.50% 8.70% Data courtesy of Stock RoverInvestors cannot expect profitability recovering until passenger traffic rebounds to at least 25-50% of last year's levels. Delta grounded most of its planes and cut operating costs and staff. So, if demand picks up at a faster pace, the company may quickly increase supply to match demand levels. Avoid ChasingInvestors betting on Delta's rebound weeks ago get to cash in on the reward now. Those who missed the rally should avoid chasing the stock.The airline will post another ugly loss in the next quarterly report. But if bookings are on a consistent rise, Delta may have enough data to establish revenue guidance for the rest of the year. That will only help the stock hold its levels.Chris Lau, contributing author for InvestorPlace.com and numerous other financial sites. Chris has over 20 years of investing experience in the stock market and runs the Do-It-Yourself Value Investing Marketplace on Seeking Alpha. He shares his stock picks so readers get original insight that helps improve investment returns. More From InvestorPlace * Why Everyone Is Investing in 5G All WRONG * Top Stock Picker Reveals His Next 1,000% Winner * The 1 Stock All Retirees Must Own * Look What America's Richest Family Is Investing in Now The post Avoid Chasing Delta Airlines After Stock Price Took Off appeared first on InvestorPlace.