Best of the Week
Most Popular
1.Independent Scotland Will Disintegrate as Unionist Regions Demand Referendum's to Rejoin UK - Nadeem_Walayat
2.Bank of England Panic! Scottish Independence Bank Run Already Underway! - Nadeem_Walayat
3.Scottish Independence Referendum Result NO 55%, YES 45% - Vote Forecast - Nadeem_Walayat
4.Scotland Independence Result NO Win 55% to Yes on 45% - Nadeem_Walayat
5.US Dollar Forecast to Go Much Higher - David_Petch
6.Russian Union Of Engineers Accuses Ukraine Airforce In MH17 Crash - Raul_I_Meijer
7.The Emergence of the US Petro-Dollar - Gary_Dorsch
8.Don't Miss This Gold Buying Opportunity - Brien Lundinr
9.Silver Price: A Collapse and a Rally - DeviantInvesto
10.Silver Buyers Keep Stacking And Demand Higher Despite Falling Prices - 18th Sept 14 - GoldCore
Last 5 days
Hedge Funds Surpass 2007 Leverage; New Era of 'Permanent Investigations' Confirms Imminent Reversal - 23rd Sept 14
Home Healthcare Cuts Threaten 500,000 Jobs and Female-Owned Businesses - 23rd Sept 14
Silver, Gold, Debt and Taxes - 23rd Sept 14
A Post-Petrodollar Play for Triple-Digit Gains - 23rd Sept 14
Regime Uncertainty Weighs on U.S. Economic Growth - 23rd Sept 14
Bread, Circuses and Bombs - Decline of The American Empire - 23rd Sept 14
Has The Gold Price Drop Run Its Course? - 23rd Sept 14
Stocks Rally Following Janet Yellen's Conference and Scotland's Historic Referendum Result - 23rd Sept 14
Why Isn’t U.S. Housing Market A Bubble? - 23rd Sept 14
The Macro View and the Stock Market - 23rd Sept 14
Gold, the Fed and the Looming Stock Market Correction Q&A - 23rd Sept 14
Can Gold Act as a Safe Haven Again? - 23rd Sept 14
Tesco Super Market Giant Fast Disappearing Down a Financial Black Hole - 22nd Sept 14
Where China and Japan Are Investing Billions - 22nd Sept 14
Scotland YES 71% - Global Youth Intifada Moves On - 22nd Sept 14
U.S. Dollar: The Last Hurrah? - 22nd Sept 14
China Moves To Dominate Gold Market With Physical Exchange - 22nd Sept 14
One Giant Cluster Ponzi - 22nd Sept 14
The Millenial Cult Of Global Warming - 22nd Sept 14
Dubai Residential is NOT a Property Bubble But the Party’s Over - 22nd Sept 14
Stock Market Topping Process Update - 22nd Sept 14
Indian Stock Market BSE SENSEX The Encore Rally - 21st Sept 14
ISIS Fear-Mongering Ahead of Another US False Flag? - 21st Sept 14
Ecology Politics And Haeckel's Tree Of Meaning - 21st Sept 14
ASX200 Stock Market Index Set For New Highs - 21st Sept 14
Scottish Referendum Not Avoiding The Future - 21st Sept 14
Five Lessons Learned from the Scottish Referendum - 21st Sept 14
The Problem With UKIP And Other I I P's - 21st Sept 14
Stocks Bull Market Resumes - 20th Sept 14
Gold And Silver - Current Price Is The Story - 20th Sept 14
Can the U.S. Economy Withstand Another Housing Market Breakdown? - 20th Sept 14
Nervous Investors Will Hate the Money You Make With This Strategy - 20th Sept 14
Cheap Gold Stocks Upleg Intact - 20th Sept 14
Monetary Policy Killing The System - 20th Sept 14
Scotland and the Spirit of Our Time - 20th Sept 14
Bitcoin Price Charts In-Depth Analysis - 19th Sept 14
Alibaba is Focused, Will Use Money in Emerging Areas - 19th Sept 14
Bird's Eye View of the Gold Stocks - 19th Sept 14
Scotland Independence Result NO Win 55% to Yes on 45% - 18th Sept 14
Silver Price: A Collapse and a Rally - 18th Sept 14
Here's Why Trendlines are Your New Trading Best Friend - 18th Sept 14
Silver Buyers Keep Stacking And Demand Higher Despite Falling Prices - 18th Sept 14
The "Hidden" Billions in the Alibaba IPO - 18th Sept 14
Russian Union Of Engineers Accuses Ukraine Airforce In MH17 Crash - 18th Sept 14
Monetary Policy Weighs on Gold and Silver - 18th Sept 14
Global Currencies Analysis...The World According to Chartology - 18th Sept 14
Gold Price Hammered by Strong U.S. Dollar - 18th Sept 14
Is Citigroup the Dumbest Bank Ever? - 18th Sept 14
Scotland Must Vote Yes! For All Of Us - 18th Sept 14
Scottish Independence Referendum Result NO 55%, YES 45% - Vote Forecast - 18th Sept 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

You've never seen this before and may never again

Two Energy Stocks to Buy Now Before Prices Rebound

Companies / Oil Companies Mar 12, 2013 - 03:03 PM GMT

By: Money_Morning

Companies

Tim Melvin writes: If you're looking for energy stocks to buy, now's a good time to snag some deals.

Energy stocks have seriously lagged the overall stock market for some time now as the weak economy has reduced demand.

The Energy Information Agency released a report Feb. 27 stating that oil demand in 2012 was the lowest since 1996, and gasoline demand was the lowest since 2001.


Although it can be difficult to measure accurately, a slower-than-historical growth rate in China seems to have slowed demand from the world's largest importing nation as well.

As a result, the oil services exchange-traded fund (NYSE: OIH) is up just over 0.2% in the past year, compared to the overall market's 15% return. The Vanguard Energy ETF (NYSE: VDE) has a wider scope of energy companies, but also lags the market with a 12-month return of just 4.16%.

In spite of the current weakness in demand, the one thing we know for certain is that the global economy cannot pick up without an increase in demand for oil and gas. Although these stocks are out of favor right now, the odds are high that over the next several years they will become growth darlings once again as energy demand inevitably rises.

Patient contrarian investors can take advantage of this potential profit landfall by buying into these energy stocks now, while they are unloved and very cheap based on historical levels and future prospects.

Two Energy Stocks to Buy Now
Nabors Industries Ltd. (NYSE: NBR) is one example or a world-class company that can be picked up on the cheap right now by astute, patient investors.

The company is the largest land-based drilling contractor and has a dominant position in the United States and Canada. It will be a huge beneficiary of increased shale finds and other unconventional oil and gas activity as it owns most of the rigs.

It also has a presence in Australia and can be expected to expand that over time as new shale discoveries in that region begin to come online in the years ahead.

Although natural gas prices remain weak, the company is taking the long view. Eventually natural gas will become a bigger part of the U.S. energy picture and drilling activity will resume.

With that in mind Nabors has been updating its equipment and modernizing the rig fleet. It also has some smaller divisions for sale as they are now viewed as non-core assets. Nabors will use the proceeds to reduce its overall debt load.

The stock trades for less than the value of the net assets with a price-to-tangible-book-value ratio of just 80%. Nabors' board just announced its first ever dividend - 4 cents per share - and although it is hardly a high-yielding stock it is reasonable to expect that payout to grow as the oil and gas industry improves in the future.

If the shares recover just half of the decline over the past five years of economic weakness, investors at today's price will almost triple their original investment in the shares.

A Reversal for this Brazilian Leader?
In addition to concerns about the oil and gas sector, specific concerns about weakness in Brazilian markets and economy have weighed on the share price of Petroleo Brasileiro Petrobras SA (NYSE ADR: PBR). The company is located in Brazil and has primarily done business in South America, but is turning its attention to its larger northern neighbor.

The company is controlled by the Brazilian government and is one of the largest oil and gas companies in the world. Thanks to the combination of industry and national concerns the stock now trades at less than 25% of the valuation reached back in the middle of 2008.

The company should see strong production increases this year as new fields and projects come online. They also have aggressive expansion plans and have identified $16 billion of non-core assets to sell in order to fund a build out of infrastructure and increased exploration activities.

Much as the combination of sector and national concerns has weighed on the shares, they should combine to give the stock a boost over the next five years. The Brazilian government is working to get the economy back on a growth trajectory and the 2014 World Cup and 2016 Summer Olympics should give the economy an additional boost over the next three years.

With the stock trading at 80% of tangible book value and a single-digit price-to-earnings ratio, the depressed valuation would seem to reflect all the bad news and leave the shares in a position for a sharp rebound.

Petrobras surged more than 15% Wednesday on news it would raise the price of diesel fuel 5%.

The rest of the world's industries cannot continue to get healthier without increasing energy demand. As the global economy shows signs of getting back on track over the next few years, the cheap energy stocks could easily lead the markets higher.

Money Morning Global Energy Strategist Dr. Kent Moors just profiled a new shale oil discovery in Australia. Check out this latest report: The Arckaringa Basin Could Be the Largest Shale Oil Find of All Time.

Source :http://moneymorning.com/2013/03/08/two-energy-stocks-to-buy-now-before-prices-rebound/

Money Morning/The Money Map Report

©2013 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2014 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014