Oil & Gas Equipment & Services ETF

We received a positive response to our post on the stocks that make up the Clean Energy ETF (PBW) last week. Below we highlight the stocks that make up the S&P Oil & Gas Equipment & Services ETF (XES).

As shown in the chart below, XES is currently trading well above its 50-day moving average. Obviously, its holdings are trading well into overbought territory as well. Superior Energy (SPN) is the furthest above its 50-day moving average at 24.48%. SPN is followed by FTI, PTEN and CAM. TDW, ESV and RDC have the lowest estimated P/E ratios of the stocks that make up XES, while FTI, EXH and SLB have the highest.

Comments

[Michael Fit...:]

I think the oil service sector is the #1 investment option for investors today. I cannot make a case for any of these stocks being over-valued at current prices. The outlook for energy is so bullish, the outlook for a sane energy policy in the US so bearish, that these companies will out-perform the overall broad market averages by leaps and bounds for years and years to come. Oil has become the new world currency (replacing the weak US dollar), and these companies are the printing presses of this currency. They actually have more power over the US economy right now than the Federal Reserve. This will continue until the President and Congress:

1) acknowledge peak oil
2) adopt a rational energy policy to deal with it.

Here is a good start:

seekingalpha.com/artic...

All that said, oil services funds/ETF's sometimes have violent corrections to shake out the weak-of-heart. These can happen any time and there is no sense trying to time things. Just buy em and hold em.

2008 May 18 10:38 AM

[Big Schu:]

You may be right, BUT... I took some money off the table. The charts can't keep going straight up. They will revert to the mean. Then you can step back in when they hit their 50 or 200 day MA. How does that saying go "...and pigs get slaughtered"?

2008 May 18 11:20 AM

[Michael Fit...:]

Possibly. That said, there aren't many oil services companies with PE's over 20, yet they are making net income hand-over-fist and growing their earnings at nice growth rates. What other sector of the market is doing this other than other oil and nat gas related investments? Financials? Consumer staples? Health Care? Nope. Energy is where the action is. For an historical reference, check out the oil services stock performance in the 1970's with that of the broad market. Now, that ended with the end of the OPEC embargo and oil prices fell dramatically. That said, that was a POLITICAL energy crisis. Today, we have a supply/demand driven energy crisis. Oil will never fall again like it did after the first OPEC embargo. IMHO.

2008 May 18 12:27 PM

[Urbane Gori...:]

Overbought or not, I really like the P/Es of some of these companies. Buy on a dip.. And thanks to Bespoke for bringing forth some names that I've not encountered.. Thx jegan ;-)

2008 May 18 01:13 PM

[haydete:]

Isn't one of the features of an ETF that it averages many, albeit similar stocks? Some will always be over or under bought within the sector, but it might just average out overall.

2008 May 18 04:53 PM

[R. Richard ...:]

One thing to observe in this "industry" is capacity; the degree of use of existing capacity; the ability to, and rate of, increase (in) capacity.

2008 May 18 05:57 PM

[richjoy:]

Hard to believe RiG is up <12% YTD.

I like this ETF, but you must realize no stock more than 3-4% of the portfolio; thus great or dismal performance of one or two names won't have much impact on XES...this is an industry play (which is fine with me).

2008 May 18 08:23 PM

[thekatd:]

Oil & Gas Equipment, Service stocks is my highlighted industry for 2008. My 5 stock picks for this industry is up about 19.5% YTD while XES is up about the same. I can only see this industry going up, at least until the end of the year.

2008 May 18 09:43 PM

[quant2325:]

See Matt Simmons' latest PowerPoint presentation regarding the rusting infrastructure of the oil companies (www.simmonsco-intl.com...). There are a few individual stock opportunities due to this trend, and it does justify the forward multiples of the stocks that comprise the XES.

2008 May 19 02:12 AM

[NOWHEREMAN:]

nice breakdown, the thing about moving averages is that they rise with the move and one has to be really nimble to get in and out.

Personally, in uptrends I like to buy stocks which Jim Cramer pans. Right now I am heavy into GW, PKD, and ICO.

2008 May 19 08:48 AM

[Seaferer20:]

With 20 years experience as a registered investment advisor, I am a propenent of the MAD investment philosophy, multi-asset diversification. Roger Gibson's book Asset Allocation will tell you all about it.
Having said that I strongly agree with the Fitzman that energy and its related sub-sectors should be overweighted in one's portfolio for at least the next five years. The broken US political process just kicks the can down the road and lacks any semblance of a sane energy policy.
Meanwhile, XES is a great, low-cost way to invest in numerous oil-service stocks. Buy and hold!!

2008 May 19 09:23 AM