Few sectors contained more promise during the recent global GDP expansion than drillers and oil servicers. However, few sectors became more oversold than the aforementioned, as well, during the oil bust in 2008. Further, while one should not expect oil to return to the $140-range anytime soon, the notion that oil will remain in the $40-50 range for a long time is equally slim. And that makes the case for Oceaneering International (NYSE: OII).
Oceaneering provides offshore oil companies with underwater drilling support, construction, inspection, and repair services. OII's strong market share in the remotely operated vehicles segment should drive solid, long-term growth. There's likely to be some weakness in subsea products / projects, but this does not blot-out the overall positive story. The First Call F2009 / F2010 EPS estimates for OII are $3.19 / $3.44.
Stock Analysis: Oceaneering is a moderate-risk stock. Consider buying a 25% position in OII now; then buy another 25% in three months, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your OII position in the first half of 2009. Sell/Stop Loss if you were to buy shares in this company: $22.
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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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