Energy Services Trio

05/29/2014 7:00 am EST

Focus: STOCKS

Stephen Leeb

Founder and Research Chairman, Leeb Group

We like the oil service companies, whom producers depend on to assess oil reservoirs and provide, operate, and maintain the equipment needed to get the oil out, explains Stephen Leeb, editor of The Complete Investor.

Their role has grown increasingly central as the focus on getting oil from shale has made the extraction process ever more complex.

When you talk about oil service companies, one company always heads the list: giant Schlumberger (SLB), the leading oil services provider (both on land and offshore) for more than two generations.

It holds dominant franchises in oilfield services and production, including reservoir characterization, which is critical in developing new reserves and squeezing additional oil from existing wells. It’s also a leading provider of drill parts.

Another favorite, benefiting from the shale boom, is National Oilwell Varco (NOV), which, among the service companies, is the clear leader in unconventional oil. It’s also the largest producer of equipment for fracking (and for deepwater drilling too).

At the moment, the shares are exceedingly cheap, sporting a P/E relative to projected growth—a metric we call PEG—well below that of the S&P 500 (SPX). The company throws off a lot of free cash, and the added kicker is that it could easily attract a suitor; we’ve put it on our list of potential takeovers.

A third, smaller company is in construction and engineering, Chicago Bridge & Iron (CBI). It specializes in energy projects in areas ranging from liquefied natural gas, to nuclear energy, to petrochemicals. Its longer-term growth should benefit from its likely role in China’s push to build nuclear plants.

Its shares have come down recently, mainly since the harsh US winter led to a slight softening in first-quarter earnings, creating an excellent buying opportunity.

Subscribe to The Complete Investor here…

More from MoneyShow.com:

Dynamic Play on Energy

Value Expert Eyes Energy

Schlumberger: Head of the Class

Related Articles on STOCKS

Keyword Image
11 Reasons to Buy Microsoft
12/11/2017 5:00 am EST

For our latest recommendation, we revisit one of the world's most prominent technology companies, Mi...

Keyword Image
A Trio of Top-Tier Biotechs
12/11/2017 5:00 am EST

We hold three biotech stocks in our growth portfolio — Biogen (BIIB), Bioverativ (BIVV), and R...

Keyword Image
Saudis, Oil and ETFs
12/11/2017 5:00 am EST

Under the guise of clamping down on “widespread corruption,” Prince Mohammed bin Salman ...