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The energy sector was one of the most troubling sectors during 2008 as a strong fundamental basis was not mirrored by a strong performance. Instead, the S&P energy composite was down over 35% for the year. This should not scare investors away from the sector, but instead be regarded as a golden opportunity for buying quality equities at extremely cheap prices. These three stocks have what it takes to be winners during 2009.

Noble (NYSE:NE) has been one of those picks that was always been ignored by the media. Not only does it fall into a sub-sector of energy that is generally out of favor, but whenever the deepwater drillers receive press coverage, it seems as if the only company anyone wants to talk about is Transocean Limited (NYSE:RIG) as it is the largest of the three deepwater drillers. What analysts forget to mention is that being the biggest does not always mean you are the best, especially in the case of the deepwater drillers.

Taking a look at some of the numbers, we can see that the margins are best in class at 53.42% operating margin and 44.24% profit margin (both trailing). The stock price is almost 2/3s from its high, and at one point down almost 75%, yet earnings estimates for fiscal year 2008 and fiscal year 2009 are actually up in even the most negative analyst estimates. Average analyst estimates for fiscal year 2009 are currently $6.93, only down $0.39 from three months ago. The most critical analyst estimates are sitting at $5.80 in 2009, which would leave Noble trading at less than 4.5x P/E for 2009. Remember that during economic boom times, energy service stocks like Noble trade at P/Es in the low teens.

Noble is the type of stock that at the height of the next economic expansion could easily trade at more than twice its current value, even with oil prices that aren’t too far above the current $50 per barrel. Only about half of Noble’s revenue is from deepwater contracts, and they receive many contracts from governments whose national budgets are reliant on crude oil revenues and are very unlikely to cancel contracts, namely PEMEX (Mexico) and Petrobras (NYSE:PBR) (Brazil). Noble also has held up extremely well in the worldwide semi-submersible market, with many of the rates not slipping. However, they have lost some ground, in some cases up to 50%, on their deepwater drillship rates going into the future.

This isn’t all bad news as the drillships only make up 3 out of the current 58 vessels in Noble’s fleet. The revenue drivers going forward are going to be from the semi-submersibles, but many analysts are still a step behind and downgrading Noble based on their drillships contract rates falling. On top of all this, Noble has room to grow with the extreme likelihood of higher crude oil prices in the future as well as a potential for eight newbuilds, up to four of which could be drillships. Noble has been a steady dividend payer and also a fan of rewarding its shareholders with special one time dividends.

The rest of this article is included in Bullish Bankers’ newsletter “The Best Stocks of 2009″ that can be downloaded here.

- Charles W. Petredis

Disclosure: The author, the author’s family, and the mutual fund the author manages are all long NE.

Source: Noble Corp. Set to Soar During Next Economic Expansion