DJ Merrill Lynch Says Fill Up On Oil-Services Stocks>RDC T
DJN: DJ Merrill Lynch Says Fill Up On Oil-Services Stocks>RDC TDW
By K. Maxwell Murphy
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Investors of all types should "significantly
overweight" their portfolios with oil-services stocks, Merrill Lynch analyst
Kurt Hallead said in a Wednesday morning conference call.
In five out of the last six years, Hallead said, the Philadelphia Oil
Service Index has outperformed the Standard & Poor's 500 Index. In those
five years, he said, the average relative outperformance has been a whopping
50%.
Merrill advocates a "broad package" to "maximize liquidity," and recommends
offshore and land drillers, plus some mid-cap among the services sector.
Merrill's top seven picks are, in order of projected upside to the target
prices assigned them by the firm's research team: Rowan Cos. (RDC),
Tidewater Inc. (TDW), Precision Drilling Corp. (PDS), Ensco International
Inc. (ESV), Nabors Industries Inc. (NBR), Noble Drilling Corp. (NE) and
Smith International Inc. (SII).
Hallead predicted that the Philadelphia Oil Service Index, which was
recently at 137.73, up 1.65 or 1.2%, will climb to more than 170 points,
"potentially by late this year or early next." He likened the situation to
fall 1997 - the last peak for the stocks in the oil-services sector.
Investors are just beginning to see the strength in the "absolute and
relative multiples," and the "magnitude of pricing power and earnings
momentum" in the industry. |
