Oil & Gas Service ETFs Are Now Historically Cheap

Oil & Gas service stocks got beat up this summer and remain historically cheap relative to the S&P 500 on the basis of forward price-earning ratios. Additionally, the usual cycle-ending glut in supplies is absent, productivity of wells continues to decline, and a likely soft landing for the world economy should keep energy demand from collapsing.

Thus, fears of a plunge in drilling activity and a peak in the earnings growth for this high-beta, boom/bust energy sector appear to be overdone, says the Bank Credit Analyst. Go back to an overweight position, they suggest.

You can gain exposure through the following exchange traded funds (ETFs). The Oil Services HOLDRS is by far the most traded (but least diversified):

Oil Services HOLDRs (OIH)
PowerShares Dynamic Oil & Gas Services (PXJ)
iShares Dow Jones US Oil Equipment Index (IEZ)
SPDR Oil & Gas Equipment & Services (XES)

Comments

[Contrarian ...:]

Crude oil will push higher again. And dwindling reserves will force oil majors to shell out trillions of dollars on oil and natural gas exploration. So follow the money: Buy the strongest oil service sector stocks and ETFs now, and hold for the long term.

www.contrarianprofits....

2008 Jul 31 04:18 PM