Best of the Week
Most Popular
1.The Gallery of Crowd Behavior: Goodbye Stock Market All Time Highs - Doug_Wakefieldth
2.Tesco Meltdown Debt Default Risk Could Trigger a Financial Crisis in Early 2015 - Nadeem_Walayat
3.The Trend Every Nation on Earth Is Pouring Money Into - Keith Fitz-Gerald
4.Do Tumbling Buybacks Signal Another Stock Market Crash? - 26Mike_Whitney
5.Could Tesco Go Bust? How to Save Tesco from Debt Bankruptcy Risk - Nadeem_Walayat
6.Gold And Silver Price - Respect The Trend But Prepare For A Reversal - Michael_Noonan
7.U.S. Economy Faltering Momentum, Debt and Asset Bubbles - Lacy Hunt
8.Bullish Silver Stealth Buying - Zeal_LLC
9.Euro, USD, Gold and Stocks According to Chartology - Rambus_Chartology
10.Evidence of Another Even More Sweeping U.S. Housing Market Bust Already Starting to Appear - EWI
Last 5 days
Stocks Bear Market Crash Towards New All Time Highs as QE3 End Awaits QE4 Start - 31st Oct 14
US Mortgages, Risky Bisiness "Easy Money" - 30th Oct 14
Gold, Silver and Currency Wars - 30th Oct 14
How to Recognize a Stock Market “Bear Raid” on Wall Street - 30th Oct 14
U.S. Midterm Elections: Would a Republican Win Be Bullish for the Stock Market? - 30th Oct 14
Stock Market S&P Index MAP Wave Analysis Forecast - 30th Oct 14
Gold Price Declines Once Again As Expected - 30th Oct 14
Depression and the Economy of a Country - 30th Oct 14
Fed Ends QE? Greenspan Says Gold “Measurably” “Higher” In 5 Years - 30th Oct 14
Apocalypse Now Or Nirvana Next Week? - 30th Oct 14
Understanding Gold's Massive Impact on Fed Maneuvering - 30th Oct 14
Europe: Building a Banking Union - 30th Oct 14
The Colder War: How the Global Energy Trade Slipped From America's Grasp - 30th Oct 14
Don't Get Ruined by These 10 Popular Investment Myths (Part VIII) - 29th Oct 14
Flock of Black Swans Points to Imminent Stock Market Crash - 29th Oct 14
Bank of America's Mortgage Headaches - 29th Oct 14
Risk Management - Why I Run “Ultimate Trailing Stops” on All My Investments - 29th Oct 14
As the Eurozone Economy Stalls, China Cuts the Red Tape - 29th Oct 14
Stock Market Bubble Goes Pop - 29th Oct 14
Gold's Obituary - 29th Oct 14
A Medical Breakthrough Creating Stock Profits - 29th Oct 14
Greenspan: Gold Price Will Rise - 29th Oct 14
The Most Important Stock Market Chart on the Planet - 29th Oct 14
Mysterious Death od CEO Who Went Against the Petrodollar - 29th Oct 14
Hillary Clinton Could Be One of the Best U.S. Presidents Ever - 29th Oct 14
The Worst Advice Wall Street Ever Gave - 29th Oct 14
Bitcoin Price Narrow Range, Might Not Be for Long - 29th Oct 14
UKIP South Yorkshire PCC Election Win is Just Not Going to Happen - 29th Oct 14
Evidence of New U.S. Housing Market Real Estate Bust Starting to Appear - 28th Oct 14
Principle, Rigor and Execution Matter in U.S. Foreign Policy - 28th Oct 14
This Little Piggy Bent The Market - 28th Oct 14
Global Housing Markets - Don’t Buy A Home, You’ll Get Burned! - 28th Oct 14
U.S. Economic Snapshot - Strong Dollar Eating into corporate Profits - 28th Oct 14
Oliver Gross Says Peak Gold Is Here to Stay - 28th Oct 14
The Hedge Fund Rich List Infographic - 28th Oct 14
Does Gold Price Always Respond to Real Interest Rates? - 28th Oct 14
When Will Central Bank Morons Ever Learn? asks Albert Edwards at Societe General - 28th Oct 14
Functional Economics - Getting Your House in Order - 28th Oct 14
Humanity Accelerating to What Exactly? - 27th Oct 14
A Scary Story for Emerging Markets - 27th Oct 14
Could Tesco Go Bust? How to Save Tesco from Debt Bankruptcy Risk - 27th Oct 14
Europe Redefines Bank Stress Tests - 27th Oct 14
Stock Market Intermediate Correction Underway - 27th Oct 14
Why Do Banks Want Our Deposits? Hint: It’s Not to Make Loans - 26th Oct 14
Obamacare Is Not a Revolution, It Is Mere Evolution - 26th Oct 14
Do Tumbling Buybacks Signal Another Stock Market Crash? - 26th Oct 14
Has the FTSE Stock Market Index Put in a Major Top? - 26th Oct 14
Christmas In October – Desperate Measures - 26th Oct 14
Stock Market Primary IV Continues - 26th Oct 14
Gold And Silver Price - Respect The Trend But Prepare For A Reversal - 25th Oct 14
Ebola Has Nothing To Do With The Stock Market - 25th Oct 14
The Gallery of Crowd Behavior: Goodbye Stock Market All Time Highs - 25th Oct 14
Japanese Style Deflation Coming? Where? Fed Falling Behind the Curve? Which Way? - 25th Oct 14
Gold Price Rebounds but Gold Miners Struggle - 25th Oct 14
Stock Market Buy the Dip or Sell the Rally - 25th Oct 14
Get Ready for “Stupid Cheap” Stock Prices - 25th Oct 14
The Trend Every Nation on Earth Is Pouring Money Into - 25th Oct 14 - Keith Fitz-Gerald
Bitcoin Price Decline Stopped, Possibly Temporarily - 25th Oct 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Stocks Epic Bear Market

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