It’s round two of our look toward the 2008 stock market. One of the more obvious plays is in energy, where the rising cost of oil is highlighted almost daily. But don’t assume that the rising price of the commodity will boost oil companies! Never confuse the two, although they might interact on paper. We’ve got some winners… let’s get started.

Oil Equipment, Services & Distribution – Jimvesting picks THREE!
On December 14, 2007, Jim Cramer said that “drillers and oil producers are in a quick, shallow decline, and they’ll soon be flush with cash.” This sentiment holds true in three companies, which each offer unique areas of growth in 2008.

Jimvesting picks Transocean (NYSE: RIG)
The play with Transocean centers on their drilling capabilities. Their oil rigs can reach depths no other drills can. Add this to their locked in 2008 contracts, and you have quite a find! RIG is the leading provider of contract drilling services for the oil and gas industry. Acquiring rival Global-SantaFe (GSF) last year sets RIG up with some major growth benefits. But it is their solid fundamentals and a tried-and-true business strategy that makes this trade.

Jimvesting picks Halliburton (NYSE: HAL)
Halliburton has seen solid growth in the third quarter from the Middle East, Europe and Africa. Margin growth is expected to continue next year, and they trade at a discount to their peers with a P/E around 14.1 versus the industry’s 18.8. HAL carries slightly more risk than RIG and SLB because of an added political exposure, but Bush’s time in office will prove golden for Halliburton. An outperforming company in an outperforming sector, HAL gets my bid.

Jimvesting picks Schlumberger (NYSE: SLB)
Standard and Poor’s believes that there is “an increasing trend toward new gas and oil development opportunities that require higher levels of technology content.” I agree with this assessment, and think it plays nicely into the hands of Schlumberger, the largest oil and gas services company. SLB’s WesternGeco seismic segment shows a 19% gain in revenue for the new year. Schlumberger is primed for margin growth in international markets, trust this pick.

Oil & Gas Producers – Jimvesting picks XTO Energy (NYSE: XTO)
The oil & gas sub-industry is a big one. With firms ranging from the largest U.S. company by market cap, Exxon Mobil (NYSE: XOM), to similarly large Chevron (NYSE: CVX), to natural gas powerhouse Chesapeake Energy (NYSE: CHK). These companies are extremely reliable, and you may find safe refuge during troubled trading times in these energy leaders. Lets go find our winner.

Chesapeake is an interesting play right now. The price of natural gas is low, but is it too low? If the price were to increase, as many project, Chesapeake could bring home the win for us. However I feel that they will be underperforming this quarter relative to Wall Street sentiment because there is no inclination natural gas will be picking up any time soon. Insider trading has been neutral over the past 6 months, the stock has been in a plateau since 2006, and their 13.2 earnings ratio is at or above their peers.

XTO Energy is my favorite right now because of their aggressive growth strategies. In 2007, they expanded their positions in the Rockies and in Texas; in turn, this should push oil and gas production growth +15% in 2008. Efficiency gains from stronger positions in these areas, as well as key acquisition of Dominion Resources in July last year ($2.5 billion deal), are projected to increase operating earnings by a whopping 10% for 2008! While Chesapeake offers a slightly better valuation, XTO is a much better growth prospect for this year.

That’s it for this week; next week will feature the basic materials sector.
-Jimvesting

Related Posts

1. Best Energy Stocks – Oil & Gas Calls for 2008
2. Stock Market 2008: Utilities
3. Stock Market 2008: Industrials Sector
4. Stock Market Got You Down? – Why Jimvesting Is A Buyer In This Market!
5. Stock Market 2008: Information Technology (Part 2)