"In any industry, one of the most sure-footed means of keeping profits steady is to own the suppliers of production means -- the old 'invest in the picks and shovels' approach," explains Neil George in Personal Finance.
He says, "For refiners, it means pipe, compressors, and the other bits used to crack crude into further profitable products." Here, he looks at a trio of favorites: Dresser-Rand Group Inc. (NYSE: DRC), Shaw Group Inc. (NYSE: SGR), and Tenaris (NYSE: TS).
"Dresser Rand is a leading global producer of highly specialized compressors and turbines, nearly 95% of which are used in the energy business. Compressors are used extensively in refineries; they're a crucial part of equipment used to process heavy and sour crude oils. The reactions used to process these more-complex crudes require generating extreme pressure and temperature.
"Dresser's products are also used to process Canadian oil sands. Dresser is also involved in some high-tech deepwater equipment work. The company has designed a subsea compressor and separator for Norway's Statoil.
"This equipment literally sits on the seafloor; the compressor helps to separate gas from oil and transport these commodities by subsea pipeline to distant floating production platforms.
"As we're becoming more aware, both existing refineries and new refineries are needed if the nation's energy needs are to be more efficiently addressed. We need to own the companies called upon to build them, such as long-time favorite Shaw Group.
"The company has considerable experience in designing, building, and planning new refineries all over the world. Although it's tough to build a new refinery in the U.S., countries such as China, India, and Saudi Arabia have been building new facilities. Shaw is a logical partner on such deals.
"The company also handles projects related to the expansion and upgrading of existing facilities. In particular, the company has experience upgrading older refineries to handle a wider array of feedstocks, including the sludgy stuff up north as well as down south.
"Shaw is a leader in coal and nuclear plant construction projects as well. Both markets have considerable opportunity for expansion.
"We also recommend a company that's a bit behind the headlines, Tenaris. Despite a lack of pop financial popularity, the company has emerged as the global leader in the manufacture of advanced pipes. Through a series of acquisitions in the past few years, including Maverick Tube, Tenaris has grabbed a leading share of the U.S. market for energy-related pipes."
Each day, Steven Halpern's TheStockAdvisors.com features the latest investment commentary and favorite stocks of the nation's leading financial newsletter advisors.
The week in preview: Focus returns to earnings: Alcoa, Chevron, Family Dollar
Comfort Zone Investing: Survival of the fittest -- letting some banks fail
Three All-American stocks for portfolio fireworks
Reader Comments (Page 1 of 1)
11-16-2007 @ 3:10PM
mark.d said...
Dresser Rand is experiencing a lot of labor relation problems in its New York facilities. An ongoing labor strike, one predicted for the summer of 2008, and a largely unhappy group after being forced a contract with threat of closure last year. Having roughly 1400 unhappy skilled workers in an area that is lean on skilled workers is not a good sign.