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Gold/Mining/Energy : Big Dog's Boom Boom Room
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From: Big Dog2/28/2005 8:56:37 AM
   of 206265
 
RBC Capital

Oil Service Strategist -- February 28, 2005

Investment Opinion

Daily Rap

Its about time! Better late than never! Whatever...
The OSX closed at an all-time high of 142.74, topping the 141.64 level reached in September 2000.
On an intraday basis, the OSX hit 143.24, marginally below the intraday high of 143.98 also achieved in September 2000.
We expect the OSX to continue establishing new benchmarks in 2005.
In other words, its not too late to get in the game.

Assessment

So far in 2005, 11 of 29 companies in our coverage universe are up more than 20% while only 4 are up less than 10%.
The average performance of RBC's oil service coverage universe is +18.5% with the OSX +15%.
Every stock we cover has outpaced the S&P 500.
As the adage goes, don't confuse brains with a bull market.

Cycle Peak?

We have received numerous investor inquiries as to how to identify a cycle peak.
This is somewhat of a bullish indicator as investors are already trying to formulate an exit strategy.
Clearly, the market is still not over-exuberant.
However, we do anticipate that the incremental investor in the energy space will be less valuation sensitive than long-time energy players.

Here is a list of potential cycle peak lead indicators:

US and China GDP
Oil Service company capacity expansion
E&P industry drilling economics

Positioning

Asset intensive groups (land and offshore drillers) should outperform services, at least for the next 3-6 months.
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