Ike, don't forget oil.
>5. OIL PRICES SURGE. GOOD THINGS AHEAD FOR OIL SERVICES
Oil prices surged again today on news that OPEC is ONLY going to increase
production by 800,000 barrels rather than the 1 million that some experts
had suggested. It was still greater than consensus of 700,000. We are
here to tell you once again, that $35 a barrel, $40 a barrel, $30 a
barrel, or even $25 a barrel is not going to make much of a difference in
the GREAT BOOM that we are beginning to see in the oil business. If you
are tired of hi-tech (What? You don't think JDS Uniphase (JDSU, $110,
down 5) is worth 60 times revenues?) and just wish to diversify into a
sector that should thrive in the future, then oil and oil services may be
your ticket.
We follow a few companies in this field and would invest in these first.
Exxon Mobil (XOM, $85, up 1.50) is the largest oil firm on the planet. It
is worth $300 billion and since late July, has been inching up a bit each
day. From the $75 level, it has now crossed the $85 level, approaching an
all-time high. If you look at a long term chart, say over the last 10 or
15 years, the chart shows a "straight-up" pattern. $10 in 1985, $25 by
1990, $40 by 1996. It won't be long before you are looking at triple
digits. In addition, the company buys prodigious amounts of its own stock
back.
Forest Oil (FST, $16, unch.) bottomed in March at $7.50 and has doubled
since then, moving from $12 in late July. The firm is an independent
specialist in the acquisition, exploration, development, production and
marketing of natural gas and liquids. Plus, The Anschutz Corporation, a
private corporation, currently owns approximately 37% of the Company's
common stock. Do you know what Anschutz is? The Anschutz Company and its
affiliated companies are engaged in telecommunications and media, natural
resources, transportation, real estate, sports and entertainment. The
company is one of the largest privately owned and operated companies in
the United States. One of their subsidiaries, The Anschutz Investment
Company, the venture capital arm of The Anschutz Company, founded and
incubated Qwest Communications through the early and late 1990's. They
are Qwest's largest stockholder. Why are we telling you this? We want to
be associated with winners. Anschutz is a winner.
Revenues are growing at 35% per year and profits are increasing at the 80%
level. With a market cap of less than $1 billion, you could fit 300 of
these into Exxon, above. Take your pick. A "go-for-it" type of
investment or a world dominator. Personally, we like a little of each!
Global Industries (GLBL, $13, up 1) is up 35% in just the last month.
Granted, it should never have traded at $10, but it did, and at today's
close, is still cheap. The firm is an offshore construction and oil
services company that is operating 77 rigs at full capacity. Global
provides construction services, including pipeline construction, platform
installation and removal, construction support and diving services to the
offshore oil and gas industry in the Gulf of Mexico and international
areas. What better business to be in when oil is shooting through $35 a
barrel?
And don't forget Schlumberger (SLB, $85, up 3). With a market cap
approaching $50 billion, you are buying the biggest oil services firm in
the business. They are about 40 times bigger than Forest Oil, above.
Running at $10 billion per year in revenues, they should make over $600
million in profits this year. Solid.
But there are dozens of other companies in this sector that will do well
in the future. Do some research and buy some oil and gas. When this
sector gets hot later this year, you will be amazed by the returns in your
portfolio. |
