Similar to the huge sell-off we saw in August, we'll likely see another big bounce up soon, barring a Greek default. Whether or not that bounce sticks remains to be seen, but some short term profit making will be possible on some of the most undeserved and hardest hit stocks.
HAL is an exciting investment opportunity not only for the next few weeks but for the long term. As an oil and gas services company, their profits rely not directly on the price of oil, but rather on drillers' activity. The drillers don't need $100 oil to make obscene profits; $80 per barrel "only" gets them amazing profits. Halliburton's revenues are unlikely to take much of a hit from weakened oil prices.
Driller activity has likely remained pretty steady. Halliburton is an interesting story; they're almost a technology company given the shockingly brilliant products they have provided their customers. Their "smart pad" drilling has allowed drillers in the furiously active Bakken Shale region to more efficiently get oil and gas out of the ground.
Halliburton has been absolutely slaughtered recently, Dropping about 20% since the beginning of last week. The market seems to really misunderstand HAL, and has wrongfully beaten in down. In the beginning of 2011, when oil prices were about the same as now, HAL was trading at almost double the P/E ratio it is now (12.22). At a forward P/E of 6.91, HAL is a must-consider.
Dow Chemical (NYSE:DOW)
DOW approached another 52-week low on Friday, only to finish up more than 2%. The market may not feel to good about Dow's growth prospects (forward P/E of 7.04), but the company sure as heck does not share that same sentiment. Dow recently announced that after they significantly cut their debt over the last several quarters.
In conjunction with their sales growth, they are preparing for more acquisitions next year. Their Rohm & Haas acquisition has been a tremendous success so far. The 4.30% dividend is a nice cushion for defensive investors. The stock got nailed this week, dropping from almost $28 to $22.80.
It's easy to understand why traders dumped FCX 20% this week. Both copper and gold prices got crushed this week as the dollar strengthened and global demand worries perked up again. However, some stability in the Euro should provide both metals with a big bounce up, but it is going to be impossible to time.
If you have the patience to hold this for a little while, you should do well, plus the 3.30% dividend doesn't hurt. What was once one of the darlings of Wall Street is now only trading at 5.50 times earnings. While I'm not convinced gold is an awesome investment, the strength it has seen over the last decade is not likely to be over, and the weak hands appear to be out of the shiny stuff for the short term at least.
Wells Fargo (NYSE:WFC)
One of my favorite banks got nailed this week after Moody's struck again by downgrading WFC's balance sheet. Wells' long term prospects remain intact. The company, along with the U.S. Bancorp (NYSE:USB) is the safest pick in the banking industry, given its capital reserves and well-managed mortgage exposure.
Direxion 3X Leveraged Bull Shares (NYSEARCA:ERX)
It worked the last time I recommended it, and I expect it to perform once again. The ETF is the absolutely best way to take advantage of a short term spike in oil prices. The fund holds companies like XOM, OXY, and even HAL, all of whom have gotten hit hard due to weakened oil prices.
Oil has some solid support at $80, and we may be seeing a replay of the price action seen back in August. Oil tested $80, shot up to $90, and stabilized for a couple weeks in the mid-high 80s. Energy stocks outperformed. The fund requires an ability to deal with huge swings, and its risks should be understood by those who decide to use it.
Disclosure: I am long WFC.