How long this short-term bear market in technology will last is anyone’s guess. October is traditionally a volatile month. I suspect we will have another bull run before the end of the year, suggests Mark Skousen, editor of TNT Trader.

Where to invest next? With oil prices edging higher, I’m interested in an energy producer that uses the latest technological breakthroughs to achieve high rates of return in oil and gas. That company would be EOG Resources (EOG).

Based in Houston, Texas, EOG explores, develops, produces and markets crude oil and natural gas located in the booming Eagle Ford and Permian basins in Texas and New Mexico. But it is also well diversified into Canada, the Caribbean and China.

EOG uses the latest technology in its shale fields, including microseismic, 3-D seismic and core analysis, which increases profit margins and keeps costs to a minimum. Some analysts call it the “Apple of oil.” 

As a result, EOG produces over 600,000 barrels a day, primarily from U.S. shale operations. Revenues rose 69% last year to $14.3 billion. Earnings are up sevenfold, up to $3.87 billion in net income in the past year. Profit margins exceed 27%.

The stock price is gradually moving higher. It is currently selling for 18 times expected earnings, with a return on equity (ROE) of 25%. It has over $1 billion in cash, which is plenty to cover $6.4 billion in long-term debt.

Yet in many ways, the stock is cheap. Its price/earnings to growth (PEG) ratio is only 0.21. Anything less than 1 is considered excellent.

Let’s buy EOG Resources at market and set a protective stop of $109 a share. For those wildcatters out there, consider buying the April $145 call options, which last traded at around $2.00 and expire April 18.

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