Investor finds value in the oil bear market

Published Fri, Jul 24 201511:23 AM EDT

Craig Hodges, one of the 14 members of the "Squawk Box" Platinum Portfolio , is buying shares of a small-cap energy name in a move to shake things up in the competition. The chief executive officer of Hodges Capital Management, which focuses on small-cap value stocks, decided to add shares of Matador Resources as one of his top picks for the model portfolio. Here's why he thinks there's an opportunity for the stock to move higher: Shares of the independent energy company, which engages in exploration, development and production of oil, are down 28 percent from their high in April on the back of lower energy prices. WTI crude oil prices are down 53 percent in the past 12 months, with the commodity settling at $48.48 per barrel on Thursday. Source: FactSet But as the stock retreats, Hodges believes the shares are undervalued. "Matador Resources has the best small-cap management team in energy and production," said the investor, explaining that the company is cutting costs and operating more efficiently than other firms in the space. So far in 2015, Matador reported a 27 percent increase in oil production, says Hodges, while gas production was up 63 percent. Similarly, capital expenditures declined by 43 percent. Apart from those operating metrics, the company could benefit from nine different producing horizons tested across the Delaware Basin as well as other regions, according to Hodges. Read More Goldman: Buy this stock despite drop in oil prices Other catalysts that may move the needle include Matador's efforts to build midstream facilities that could be sold in the future, along with an uptrend in production of oil and natural gas wells. Shares of Matador trade at a price per earnings multiple of 35 compared to its five-year average of 45. Its market cap stands at $1.8 billion. Analysts on Wall Street have a buy rating on the stock with a target price of $31, implying a 45 percent move higher from here, according to FactSet. CNBC Pro subscribers can access all the top picks and current standings in the Platinum Portfolio by clicking here .

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Craig Hodges, one of the 14 members of the "Squawk Box" Platinum Portfolio, is buying shares of a small-cap energy name in a move to shake things up in the competition.

The chief executive officer of Hodges Capital Management, which focuses on small-cap value stocks, decided to add shares of Matador Resources as one of his top picks for the model portfolio.

Here's why he thinks there's an opportunity for the stock to move higher: