1 Of Cramer's Favorite Oil Sector Stocks Just Became Cheap

| About: National Oilwell (NOV)

The markets have been rough for most investors, and the oil sector has been hit hard by economic concerns. Buying fundamentally sound businesses when investors are selling in fear, can often lead to sharp rebounds. One undervalued stock in the oil sector is National Oilwell Varco, Inc. (NYSE:NOV). This company manufactures and sells major drilling equipment, which is used in the production of oil and natural gas. Here are a few reasons why investors should consider shares in this industry leader now:

1. Demand for energy is going to grow around the world in the long term. Even if there is another recession, or global slowdown, the future looks bright for this company if you look past the short-term issues. Consumers in emerging market countries are going to start using more energy as their incomes rise. The demand for oil will also rise as the global population grows.

2. National Oilwell Varco has been posting solid results. The company announced earnings of $606 million or $1.42 per share for the first quarter of 2012. The company is seeing high demand for all of its products and services, and it has a backlog that exceeds $10 billion.

3. This company has an incredibly strong balance sheet with about $3.39 billion in cash and only around $510 million in debt. This gives the company the flexibility to ride out almost any economic weakness and take advantage of opportunities available to companies with balance sheet strength.

4. Mad Money's Jim Cramer likes National Oilwell Varco because it has about 70% market share in the drilling equipment industry. It's rare to find companies with that type of dominance, and that is what makes it a "best of breed" stock to consider buying. The stock hit $86 earlier this year, but has dropped to undervalued levels in the past few weeks. With solid earnings growth potential and the shares trading for about 10 times forward earnings, this stock is worth buying on dips.

Key Data Points For National Oilwell Varco:
Current Share Price: $68.07
52-Week Range: $47.97 to $87.72
Dividend: 48 cents per share which yields .7%
2012 Earnings Estimate: $5.96 per share
2013 Earnings Estimate: $6.89 per share
P/E Ratio: about 10 times earnings

Data is sourced from Yahoo Finance. No guarantees or representations are made. Please consult a financial advisor before making investments.

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