Origin Energy Ltd shares storm higher on broker upgrade

In morning trade the Origin Energy Ltd (ASX: ORG) share price has been one of the best performers on the market with a sizeable gain.

At the time of writing the energy company’s shares are up almost 4% to $9.36.

Why are they higher?

With no news out of the company, today’s move higher is likely to be attributable to a broker note out of Goldman Sachs.

According to the note, the broker has upgraded Origin Energy to a buy rating from neutral with a $10.70 price target.

Furthermore, Origin Energy has been added to Goldman’s Conviction List, driven by the optionality of its portfolio.

Its analysts believe that the progressive transition to renewable energy is set to accelerate over the next three to five years, ultimately resulting in a rebound in the forward electricity price.

Goldman likes Origin in particular due to its belief that it is well positioned to benefit from the shift due to its large generation portfolio in the key regions of Victoria and South Australia.

The broker has also upgraded industry peer AGL Energy Ltd (ASX: AGL) to a buy rating with a $31.10 price target.

Should you buy Origin Energy?

While my preference in the industry remains AGL Energy, I do agree with Goldman that Origin Energy could be a great option for investors today. Especially with its cost reduction program and the benefits of higher oil prices.

All in all, I wouldn’t be surprised to see both shares outperform the market in 2018.

As well as Origin and AGL, I think these top shares will beat the market in 2018.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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