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Gold/Mining/Energy : Big Dog's Boom Boom Room

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To: Dennis Roth who wrote (124677)	10/20/2009 10:12:03 AM
From: Dennis Roth	2 Recommendations Read Replies (1) of 206182

Logging While Investing OFS Weekly Analysis Same themes; new 2009 highs 40 pages, 32 Exhibits, 570 KB Link: sendspace.com Excerpts: The recent push higher for oil service shares seems attributable to higher oil prices... In other words, we do not believe there is incremental enthusiasm for oilfield service outlooks... Therefore, the stock moves generate valuations that appear stretched, at least on 2010, with diversified services trading at an average 25.7x P/E and 165% relative P/E, no longer as far off from the recent peak of 193% and versus prior cycle average and highs of 120% and 155%, respectively. On 2011 one can value in the stocks, but doing so broadly requires a view of a sharper cyclical recovery than we are comfortable modeling. The result is we remain stock specific. All of the above suggest a little more downside risk than upside potential very near term, in our view. But at this point we remain very selective. In diversified service large caps, HAL (top pick) and SLB appear reasonably well positioned to outperform. And we continue to prefer free cash flow generative drillers with healthy deepwater exposure including RIG and NE. We are supportive medium term and see relative opportunity in Diversified Services and deepwater offshore asset exposure.

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