3 Energy Names Showing Potential

07/20/2011 7:00 am EST


Bryan Anderson

Portfolio Manager, William O'Neil + Co., Inc.

For Bryan Anderson, it’s all about earnings season right now. He cautions retail investors to use caution with the tech sector, and tells MoneyShow.com’s Kate Stalter about some oil-services names that are worth watching.

Kate Stalter: We are talking today with Bryan Anderson, of Growth Equity Advisors in Austin, Texas. Bryan, thank you so much for being with us today, and sharing some of your ideas.

Bryan Anderson: My pleasure.

Kate Stalter: Give us your take on the current market environment, and what you believe is important for individual investors to be aware of right now.

Bryan Anderson: I think we’re entering an especially volatile and risky period with earnings season. The most important thing, in my view, for investors to be aware of are the earnings dates—when their particular positions, the particular companies, will be reporting their earnings.

It will be important for them to know what is expected by the Street, how the companies answer questions on their conference calls, and how they guide for the next quarter.

Kate Stalter: What are the sectors, global regions, or asset classes that you see right now as showing particular strength?

Bryan Anderson: Well it’s interesting…within the last several weeks, the market seems to be narrowing in terms of growth companies, and you’re seeing some past leaders fall by the wayside. So you’re seeing fewer and fewer growth companies continue to perform.

We’ve seen a few leaders in retail—an obvious name is Lululemon (LULU)—continue on and have good earnings. Others, not so much. In particular, there are some areas of technology that look especially risky and are areas to avoid.

Kate Stalter: Anything more specific about some of the areas that individuals should steer away from at this time?

Bryan Anderson: We became very concerned about the semiconductor group after Micron (MU) reported their earnings. That area is not a particularly good area to be in during the summer season, and we think there is risk there.

There is really, for the semiconductor space and technology in general, only two real growth drivers: Smartphones and tablet computers. And when you talk about a tablet, you really talk about the iPad—nothing else seems to be catching on at the moment.

You have Apple (AAPL) reporting this week, and obviously you’ve got the iPhone and the iPad there. But other areas of technology, especially personal computers, servers to some degree, those look like areas of risk for us.

Kate Stalter: Given all this then, Bryan, what are some of the investment vehicles that you are putting clients into these days?

Bryan Anderson: Well, one area that we think is somewhat insulated from weakness is the oil-services area. There is a geographic region called the Eagle Ford in Texas where there has been a major discovery, and so there are companies that are addressing this area.

Halliburton (HAL) reported excellent earnings. That would be a company that investors could look at, and I would just suggest that in the environment we’re in currently, you might look for a period of weakness to accumulate something like that.

Patterson-UTI (PTEN) is another company in that space that’s doing well. Carbo Ceramics (CRR)…they supply ceramic proppant for fracking.

All those areas seem to be doing relatively well, and are somewhat insulated from the slow economic growth that we’re in now.

Kate Stalter: Any other companies or sectors that individual investors should take a look at that you haven’t mentioned yet?

Bryan Anderson: You know, currently I’m hard pressed. The market is in a weak period; we’re in a correction. We’ll just have to see how far this correction goes, and it will be, I think, very much dependent on how earnings are reported.

This particular week, the week of July 18, is a period where earnings season really gears up. You’ve got a number of companies in a lot of different sectors reporting.

For us, it’s a period of time to be cautious…and as I said at the outset, to be very aware of which companies are reporting earnings, how they perform versus expectations, and how they guide for future quarters.

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