These Beaten Down Oil Services Companies Are Ready For A Christmas Rally

|
 |  Includes: BHI, CAM, CFWFF, CLB, CRR, DRC, HAL, HP, KEG, NBR, NOV, OIH, PDS, PTEN, RDC, RES, SLB, TS, WFT
by: David White

The market has been looking for an excuse to rally. The US economic news has been relatively good with Initial Claims (jobless) numbers below 400,000 lately. Black Friday is being called a success for retailers. The latest news suggests that Germany and France are planning a quick new stability fund that might convince the ECB to step up its purchases of EU member bonds, especially those of Spain and Italy. This is still speculation at this point, but it could well be the rallying cry for all of the money managers who want a traditional Christmas rally. If there is such a rally, energy and precious metals may rally the most. Any good news from Europe means good news for both the US and the Asian markets. It also likely means inflation and all that goes with it. A European solution may mean a stronger euro near term. This usually means higher energy prices.

Some of the most trampled energy stocks are the oil services stocks. The strange thing is that there is not a good fundamental reason for this, especially for the land oil services stocks. The new prolific oil shale fields mean there will be huge amounts of business for these companies for many years to come. They are expanding rapidly to meet this need. This is making them hugely profitable. The table below contains the current one-year forecast percentage gains for each of the listed oil services stocks based on each stock’s current price and on its one-year analysts’ target price. The data are from Yahoo Finance. The stock’s described are: Calfrac Well Services Ltd. (OTCPK:CFWFF), Halliburton Company (NYSE:HAL), Baker Hughes Inc. (NYSE:BHI), Nabors Industries Ltd. (NYSE:NBR), National Oilwell Varco Inc. (NYSE:NOV), Schlumberger Limited (NYSE:SLB), Patterson-UTI Energy, Inc. (NASDAQ:PTEN), Cameron International Corp. (NYSE:CAM), Rowan Companies Inc. (NYSE:RDC), Weatherford International Ltd. (NYSE:WFT), Core laboratories NV (NYSE:CLB), Dresser-Rand Group Inc. (NYSE:DRC), Tenaris SA (NYSE:TS), Carbo Ceramics Inc. (NYSE:CRR), Helmerich & Payne Inc. (NYSE:HP), RPC Inc. (NYSE:RES), Precision Drilling Corp. (NYSE:PDS), and Key Energy Services Inc. (NYSE:KEG). I am sure I have left many out, but I have tried to include many of the high-growth stocks that should rally well.

Stock

Forecast 1 yr. % price increase

Avg. Analysts’ Opinion

5 yr. EPS Growth Forecast per annum

PE

FPE

CFW.TO

87%

1.9

15.00%

9.26

5.53

HAL

72%

1.7

26.17%

11.53

7.78

BHI

57%

1.9

28.36%

12.14

8.77

NBR

63%

2.2

20.72%

11.60

7.07

NOV

38%

1.7

15.90%

14.66

10.95

SLB

38%

1.8

23.57%

19.62

13.44

PTEN

63%

2.1

16.57%

10.39

7.10

CAM

38%

2.0

21.32%

19.71

12.65

RDC

40%

2.1

15.84%

5.30

8.94

WFT

63%

2.2

45.87%

37.18

8.60

CLB

6%

2.7

19.65%

30.41

22.81

DRC

25%

2.2

29.80%

36.14

14.84

TS

40%

2.3

20.48%

14.84

10.64

CRR

40%

2.2

36.80%

25.73

17.37

HP

32%

2.4

23.53%

12.72

9.14

RES

55%

2.3

18.20%

9.24

6.69

PDS

67%

1.8

23.40%

16.08

7.18

KEG

53%

1.8

12.00%

12.80

7.61

Click to enlarge


The above stocks are in no particular order, although I did put the highest forecast price grower at the top, and two of the industry leading land services companies at the top too. Overall there is not much to say about these stocks. They have been beaten down. The chart of the Oil Services HOLDRS ETF (NYSEARCA:OIH) may be the best overall representation of this.

The two-year chart of the OIH ETF is below - (click to enlarge).

Click to enlarge

The slow stochastic sub chart of the OIH ETF shows that it is oversold in the near term. The OIH is far below its 200-day SMA. It is very close to long-term support. This should mean that the oil services companies are likely to rally, especially the land oil services companies. My picks among these are CFW.TO (aka CFWFF.PK), HAL, BHI, and NBR. As a longer-term play NOV has had some of the best results recently. If you wanted one of these oil service companies to buy and forget about, I might choose this one. I do not mean to imply anything bad about the other stocks. Each has its merits.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in OIH, BHI, OTCPK:CFWFF, HAL over the next 72 hours.