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By Renee O'Farrell

The basic tenet of investing is to buy low and sell high, but what that age-old saying misses is that sometimes stocks are priced low for a reason. What investors really need to watch out for are undervalued stocks - stocks that have strong earnings growth potential, yet are underpriced.

Undervalued stocks can be found anywhere, but the oil industry is especially ripe with such investment gems right now. Here are four companies that are poised to deliver great returns. The companies on this list are US companies that have market caps over $2 billion, have forward price to earnings ratios of 8 or less, and have earnings growth estimates of more than 25% a year on average for the next five years.

Halliburton Company (NYSE:HAL) is a $27.63 billion market cap company with a forward price to earnings ratio of 7.56. It pays a 1.20% dividend yield on a payout ratio of just 10.58%. Over the past five years, Halliburton's earnings per share has grown at an average rate of 9.55% a year. Going forward, analysts are predicting the company's earnings will swell more than 25% a year, on average, over the next five years. Year to date, Halliburton is down just over 13% but I think that just makes it the perfect time to buy. Dmitri Balyasny's Balyasny Asset Management is a fan of the company. The fund increased its stake by 424% during the fourth quarter. At the end of December, Balyasny Asset Management had roughly $112.16 million invested in Halliburton.

Kodiak Oil & Gas (NYSE:KOG) has $2.09 billion market cap and a forward price to earnings ratio of 7.14. It does not pay a dividend, but analysts are expecting this company's earnings to increase by an average of 42.50% a year over the next five years. Kodiak is trading at less than $8 a share right now too. While the company is down over 16.50% so far this year, with its low pricing and high earnings estimate, now looks like a good time to buy. Ken Griffin's Citadel Investment Group likes Kodiak. The fund had a position worth $73.86 million in the company after increasing its holdings by 77% during the fourth quarter.

Marathon Petroleum (NYSE:MPC) is a $11.90 billion market cap company that is priced at just 5.52 times its forward earnings. It pays a 2.86% dividend yield on a 10.06% payout ratio. Analysts say this company's earnings per share will increase by an average of 32.75% a year over the next five years. Right now, Marathon is trading at just under $35 a share, up over 6% year to date, but I think the stock will continue to climb. Barry Rosenstein's Jana Partners is definitely bullish on Marathon. It is the largest position in the fund's portfolio and a new one. Rosenstein initiated his fund's $553.84 million holding in Marathon during the fourth quarter (read about Jana Partners' bullish bets).

Oil States International (NYSE:OIS) has a $3.47 billion market cap and a forward price to earnings ratio of 8.02. The company does not pay a dividend, but it may be one of my favorites. The company's earnings increased by a respectable 8.53% a year on average over the last five years. Analysts say Oil States' earnings will increase by almost 39% a year on average over the next five years. The company is down roughly 12% year to date, trading at $67 a share, but I imagine this stock won't stay down long. Chuck Royce's Royce & Associates and Steve Cohen's SAC Capital Advisors are both fans of Oil States.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: 4 Undervalued Stocks From The Oil Industry