Jubak and Markman: MSN Mavens

01/30/2004 12:00 am EST

Focus:

Jim Jubak and Jon Markman, both columnists for CNBC on MSN Money, are also both exceptional analysts with keen insights into investment trends. Here, they offer intriguing plays on technology the oil service sector. (For more info on these advisors, click on their photos.)

Jubak, JimSays Jim Jubak, "The recent bad news from Royal Dutch Shell that the company had over-estimated reserves by 25% is good news for firms in the business of helping oil companies recover more oil and gas from existing wells. With drilling for new supply increasingly expensive, what is called enhanced recovery becomes an even more attractive proposition. Carbo Ceramics (CRR NYSE) dominates the market for ceramic propellants used to extract oil and gas from wells, and ceramic propellants are gradually picking up market share. I’m adding Carbo Ceramics it to my list of Jubak’s Picks with a target price of $63 a share by September 2004. I also like Schlumberger (SLB NYSE), based on the same theme, that oil production companies need to increase production from existing wells. While Carbo Ceramics is more of a momentum pick (the stock is trading close to the top of its recent price channel), Schlumberger is more of a value pick. Schlumberger recently traded at 27 times projected 2004 earnings; with Wall Street expecting earnings to grow by 31% in 2004, that gives the stock a PEG ratio (or p/e to growth rate) of just 0.88."

Markman, JonAdds Jon Markman, "We think the energy sector is going to continue to do well this year, and Mitcham (MIND NASDAQ) has a great niche in the oil and gas industry. Mitcham is the largest independent company specializing in the short-term leasing of 3-D seismic equipment to drillers. The name of the game for exploration and production wildcatters is to find deposits in places where no one else has seen them before, but the imaging equipment is very expensive. Mitcham–which has a tiny $35 million market cap–leases out their machines on a short-term basis, and also provides maintenance and support. Insiders and beneficial owners have bought shares from $2.02 to the high $3s. The stock recently broke out of a consolidation at the $4 level, and now looks good to go to $5.25 to $7. The stock traded as high as $33 in 1997."

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