Best of the Week
Most Popular
1.How U.S. Dollar Destruction Threatens the Global Economy - Steve Forbes
2.Why UK House Prices Will Continue Rising - 'It's Immigration Stupid' - Nadeem_Walayat
3. Bitcoin Price at Beginning of a Move up? - Mike_McAra
4.Gold Price to Plunge, Visiting Fort Knox - David_Hague
5.Silver Price Forecast - Metal to Gain Ground in August on These Factors - Jim Bach
6.Gold And Silver Will Rise With US Dollar Demise, Just Not Soon - Michael_Noonan
7.Bitcoin Price Strong Move Possible - Mike_McAra
8.Israel Gaza War Crimes - Soldier's Ordered to Shoot Civilians Including Children - C4News - C4News
9.UK House Prices Crash Warning - Daily Mail Cognitive Dissonance - Nadeem_Walayat
10.UK House Prices Boom - Top Quick Cheap Tips to Help Sell Your Home - Nadeem_Walayat
Last 5 days
Peak Gold? Russia To Surpass Australia As World No 2 Gold Producer - 20th Aug 14
AI, Robotics, and the Future of Jobs - 20th Aug 14
Stock Market Investors What's Your Exit? - 20th Aug 14
The Gold War - Thinker, Trader, Holder, Why? - 20th Aug 14
Ukraine Interest Rates Soars to 17.5% As External Debt Cannot be Repaid - 20th Aug 14
Rising Interest Rates and The End of Stimuland - 20th Aug 14
Inflation Watch: $245,000 to Raise a Child in United States - 20th Aug 14
Inside the Stunning Deal That Put Apple and IBM on the Same Side - 20th Aug 14
The US Gold in Fort Knox is Secure, Gone, or Irrelevant? - 19th Aug 14
Bitcoin Price On The Brink of a Possible Reversal - 19th Aug 14
Why Tesla Stock Price Will Double in the Next 12 Months - 19th Aug 14
Europe's Economic Malaise: The New Normal? - 19th Aug 14
The Coming U.S. Economic Collapse Will Trigger a Revolution - 19th Aug 14
Market Bubbles, Bubbles Everywhere - 19th Aug 14
This is Your Economic Recovery With and Without Drugs - 19th Aug 14
Stock Market Strong Start to Jackson Hole Week - 19th Aug 14
Iraq, Ukraine - Oh, What A Tangled Mess We Weave - 19th Aug 14
How to Apply Moving Averages as a Trading Tool - Video - 18th Aug 14
Why Short Stock Traders Are Losing Money This Week - 18th Aug 14
Stock Market Rally May be Complete - 18th Aug 14
Why Chinese Citizens Invest In Gold - 18th Aug 14
Palladium Reaches 13-Year High Over $900 oz as Gold Trading Volumes Surge 66% - 18th Aug 14
Understand and Profit from Surging European Volatility - 18th Aug 14
No Escape from The Dollar as The Currency Standard - 18th Aug 14
Stock Market New Highs Less Certain - 18th Aug 14
German Stock Market DAX About To Drop - 18th Aug 14
Stay on Board - Stock Market Big Picture - 18th Aug 14
Europe Economy Is Tanking, QE Is Coming - 18th Aug 14
Are You Ready for The Greatest Technology Revolution Yet? - 17th Aug 14
Why King Coal is Bigger than Oil or Gas - 17th Aug 14
U.S. Empire of Death and Lies - 17th Aug 14
Ukraine - Whose Spin Are We Caught Up In Here? - 17th Aug 14
Time Decay And No Escape For Abenomics - 17th Aug 14
India BSE SENSEX The Party Is Over In Bombay - 17th Aug 14
Stock Market Uptrend Looks Underway - 17th Aug 14
The Key Role Of Conspiracy Theory In Dumbing Down Society - 17th Aug 14
The Federal Reserve in Denial Mode - Bond Market Explained - 17th Aug 14
Stock Market Ukraine-Triggered Volatility, But a Flat Finish - 16th Aug 14
Stock Market Investors Conditioned To Catch The Falling Knife - 16th Aug 14
Decline And Fall Of The CO2 Crisis - 16th Aug 14
Gold Stocks Major New Upleg - 15th Aug 14
Don’t Assume What Is “Unseen” Doesn’t Exist - 15th Aug 14
HUI, Gold and Silver; Fun With Monthly Charts - 15th Aug 14
Cry for Argentina: Fiscal Mismanagement or Pillage? - 15th Aug 14
New 'LBMA Silver Price' - Still Not Transparent - 15th Aug 14
America the Neighborhood Bully Recklessly Throws its Weight Around - 15th Aug 14
The Single Best Investment for the Semiconductor Tek Stock Boom - 15th Aug 14
The Something For Nothing Society - Inflation and Getting Paid NOT to Work - 15th Aug 14
Forecasting Ability of the Elliott Wave Principle - Trader Education - 15th Aug 14
The Most Hated Stocks Bull Market - 15th Aug 14 - Puru_Saxena
America's First Oil Sands Producer and Other Natural Resources Surprises - 15th Aug 14
Life and Times in Propagandistan - 15th Aug 14
The Biggest Lesson from Microsoft’s Recent Battle with the US Government - 15th Aug 14
Russian Bear Rattles Stock Markets, but Plunge Protection Team Rides to the Rescue - 14th Aug 14
Back In Iraq: We Only Want To Save You - 14th Aug 14
Learn How to Spot High Confidence Chart Trade Setups for FREE! - 14th Aug 14
More Bad News is Good News for the Stocks Bulls - 14th Aug 14
If Mr. Rogers Ruled Wall Street - 14th Aug 14
Government Spending and Negative Interest Rates - 14th Aug 14
Gold, Silver, Dow and VIX Market Updates - 14th Aug 14
Don't Get Ruined by These 10 Popular Investment Myths - 14th Aug 14
Gold and Silver Miners that Can Make Money Now - 14th Aug 14
Low and Expanding Risk Premiums Are the Root of Abrupt Stock Market Losses - 13th Aug 14
Stock Market at the Precipice - 13th Aug 14
When Gold Miners Have Already Rallied – Will Metals Follow? - 13th Aug 14
Oil Market QE Premium Is Coming out of Price - 13th Aug 14
Putin is Winning the New Cold War - 13th Aug 14
No Silver Money For Mexico, But Perhaps Gold For Eurasia - 13th Aug 14 -
Japan Economic Collapse - GDP Plunges by 6.8%! - 13th Aug 14
Confusion To New “London Silver Price” Launch This Friday - 13th Aug 14
Interest Rate Policy Global Divergence - Really? - 13th Aug 14
Stock Market Two-Day Rally Ends with a Small Loss - 13th Aug 14
Resources Stocks Where to Stash Your Money When Europe Heats Up? - 13th Aug 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

The Biggest lie in Stock Market History Revealed

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