Best of the Week
Most Popular
1.Are UK Savings Interest Rates Finally Starting to Rise? Best Cash ISA 2017 - Nadeem_Walayat
2.Inflation Tsunami - Supermarkets, Retail Sector Crisis 2017, EU Suicide and Burning Stocks - Nadeem_Walayat
3.Big Moves in the World Stock Markets - Big Bases - Rambus_Chartology
4.The Next Financial Implosion Is Not Going To Be About The Banks! - Gordon_T_Long
5.Why EU BrExit Single Market Access Hard line is European Union Committing Suicide - Nadeem_Walayat
6.Trump Ramps Up US Military Debt Spending In Preparations for China War - Nadeem_Walayat
7.Watch What Happens When Silver Price Hits $26...  - MoneyMetals
8.Stock Market Fake Risk, Fake Return? Market Crash? - 2nd Mar 17 - Axel_Merk
9.Global Inflation Surges, Central Banks Losing Control and Triggered the Wage Price Spiral? - Nadeem_Walayat
10.Why Gold Will Boom In 2017 - James Burgess
Last 7 days
Top Ten US Dollar Risks - 27th Mar 17
The Popularity of Gambling and Investing Amongst Students - 27th Mar 17
Is Political Betting on the Rise? - 27th Mar 17
US Stock Market Consolidation Time - 27th Mar 17
Russia Crisis - Maps That Signal Growing Instability and Unrest - 27th Mar 17
Goldman Sachs Backing A Copper Boom In 2017 - 27th Mar 17
Foundation – Fall Of The American Galactic Empire - 27th Mar 17
Stock Market More Correction Ahead - 27th Mar 17
US Dollar Inflection Point - 27th Mar 17
Political Week Presurres US Stock Market - 25th Mar 17
London Terror Attack Red Herring, Real Issue is Age of Reason vs Religion - 25th Mar 17
Will Washington Risk WW3 to Block an Emerging EU-Russia Superstate - 25th Mar 17
Unaccountable Military Industrial Complex Is Destroying America and the Rest Of The World Too - 25th Mar 17
Silver Mining Stock Fundamentals - 24th Mar 17
A Walk Down the Dark Road of Bad Government - 24th Mar 17
Is Stock Market Flash Crash Postponed Until Monday? - 24th Mar 17
Stock Market Bubble and Gold - 24th Mar 17
Maps Of Past Empires That Can Tell Us About The Future - 24th Mar 17
SNP Independent Scotland's Destiny With Economic Catastrophe, the English Subsidy - IndyRef2 - 24th Mar 17
Stock Market VIX Cycles Set To Explode March/April 2017 – Part II - 23rd Mar 17
Is Now a Good Time to Invest in the US Housing Market? - 23rd Mar 17
The Stock Market Is a Present-Day Version of Pavlov’s Dog - 23rd Mar 17
US Budget - There’s Almost Nothing Left To Cut - 23rd Mar 17
Stock Market Upward Reversal Or Just Quick Rebound Before Another Leg Down? - 23rd Mar 17
Trends to Look Out For as a Modern-day Landlord - 23rd Mar 17
Here’s Why Interstate Health Insurance Won’t Fix Obamacare / Trumpcare - 23rd Mar 17
China’s Biggest Limitations Determine the Future of East Asia - 23rd Mar 17
This is About So Much More Than Trump and Brexit - 23rd Mar 17
Trump Stock Market Rally Over? 20% Bear Drop By Mid Summer? - 22nd Mar 17
Trump Added $3 Trillion in Wealth to Stock Market Participants - 22nd Mar 17
What's Next for the US Dollar, Gold and Stocks? - 22nd Mar 17
MSM Bond Market Full Nonsense Mode as ‘Trump Trades’ Unwind on Schedule - 22nd Mar 17
Peak Gold – Biggest Gold Story Not Being Reported - 22nd Mar 17
Return of Sovereign France, Europe’s Changing Landscape - 22nd Mar 17
Trump Stocks Bull Market Rolling Over? You Were Warned! - 22nd Mar 17
Stock Market Charts That Scream “This Is It” - Here’s What to Do - 22nd Mar 17
Raising the Minimum Wage Is a Jobs Killing Move - 22nd Mar 17
Potential Bottoming Patterns in Gold and Silver Precious Metals Stocks Complex... - 22nd Mar 17
UK Stagflation, Soaring Inflation CPI 2.3%, RPI 3.2%, Real 4.4% - 21st Mar 17
The Demise of the Gold and Silver Bull Run is Greatly Exaggerated - 21st Mar 17
USD Decline Continues, Pull SPX Down as well? - 21st Mar 17
Trump Watershed Budget - 21st Mar 17
How do Client Acquisition Offers Affect Businesses? - 21st Mar 17
Physical Metals Demand Plus Manipulation Suits Will Break Paper Market - 20th Mar 17
Stock Market Uncertainty Following Interest Rate Increase - Will Uptrend Continue? - 20th Mar 17
Precious Metals : Who’s in Charge ? - 20th Mar 17
Stock Market Correction Continues - 20th Mar 17
Why The Status Quo Is Under Increasing Attack By 'Populist People Power' - 20th Mar 17

Market Oracle FREE Newsletter

Elliott Wave Trading

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

© 2005-2016 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

Catching a Falling Financial Knife