"In recoveries from panic selloffs in the past, the energy patch has tended to outperform the S&P 500," notes energy sector specialist Elliott Gue.
In his The Energy Strategist, the advisor offers his outlook for the sector as well as a package of five favorite energy-related stocks, including ideas in the drilling, infrastructure. oil services and exploration areas.
"This has undoubtedly been the most challenging and unsettled market in recent history for the stock, bond, currency and credit markets. Not surprisingly, the energy sector hasn't been immune to the selling pressure.
"However, I would note that the selloff in most energy stocks I cover has little or nothing to do with fundamentals and everything to do with market sentiment and a pervasive sense of panic.
"Institutions are dumping stocks to raise cash and the primary fear infecting the energy markets is that a dramatic global economic slowdown coupled with a seizing up of credit markets will destroy demand for energy commodities..
As the second quarter earnings crunch begins in earnest this week, the bear market has investors jittery and prognosticators spinning out dire warnings. In the wake of mixed results from Alcoa (NYSE: AA) and General Electric (NYSE: GE) kicking things off last week, here's a look at what Wall Street is expecting from many of the companies scheduled to report this coming week.
Analysts surveyed by Thomson Financial are expecting the following companies to report a rise in earnings when compared to the same period of the previous year.
Nucor Corp. (NYSE: NUE): $1.80 EPS (36.6%) on sales of $6.4 billion (+53.0%)
Google Inc. (NASDAQ: GOOG): $4.74 EPS (24.9%) on sales of $3.9 billion (+41.6%)
Nokia Corp. (NYSE: NOK): 56 cents EPS (23.2%) on sales of $19.9 billion (+17.8%)
CSX Corp. (NYSE: CSX): 90 cents EPS (21.1%) on sales of $2.9 billion (+12.8%)
Altera Corp. (NASDAQ: ALTR): 27 cents EPS (18.5%) on sales of $346.7 million (+8.4%)
IBM (NYSE: IBM): $1.82 EPS (+17.6%) on sales of $25.9 billion (+9.0%)
eBay Inc. (NASDAQ: EBAY): 41 cents EPS (17.1%) on sales of $2.2 billion (+18.0%)
The need for oil drilling services will continue even if the price of oil declines, according to Richard Lehmann. Here, in his The ETF Investor, he looks at a favorite way for investors to play this trend.
"Oil prices have a triple or quadruple price boost associated with them. The first is supply/demand dynamics, the second is the weak dollar, the third is speculative fervor and the fourth inflation fears.
"A pundit said that last year it took 65 Euros to buy a barrel of oil and today it still takes 65 Euros to buy a barrel of oil. This illustrates the effect the weak dollar is having on U.S. prices and the international price of oil.
"Inflation protection used to be the province of gold, but now it seems oil is serving a similar function. We think the current oil bubble has not run its course.
"One of our past recommendations, the Oil Service Holders Trust (NYSE: OIH), was first suggested in February 2006 at a price of $101.50. We recommended it again in December 2007 at a price of $179.83.
With the economy facing soaring crude oil prices for the past year, consumers and drivers have seen a major impact on their savings. It could seem as though the good old times are over. Gasoline at $4 a gallon is not something we can ignore, and if we take into account that Americans consume nearly 40% of the world's gasoline, you can see where the problems begin. So the surge in oil prices came with an imminent effect on consumers, who had to cut back on their spending.
But since we are already in this unpleasant situation, Kiplinger offers some solutions to help investors fight against high oil prices. Kiplinger underlines in this article that one smart move would be to minimize the cost of driving by making some good energy-related investments.
Gerry Jordan, manager of Jordan Opportunity, recommends investors invest in oil companies such as Schlumberger Ltd. (NYSE: SLB) and Weatherford International (NYSE: WFT), citing strong international business. In addition, Jordan believes that higher crude prices will increase drilling demand. On the other hand, Jordan also loves power companies like Calpine Corp. (NYSE: CPN) and Reliant Energy Inc. (NYSE: RRI) as he anticipates huge power outages across the globe during this year.
Readers of this space know that one argument forwarded here is that in the era of elevated energy prices the oil/natural gas services sector is likely to remain strong for the foreseeable future, barring the discovery of cheap, widely-available, alternative energy. And among oil/natural gas services companies, Schlumberger is worth an evaluation.
Oilfield services company Schlumberger (NYSE: SLB) (pronounced: "shlum-bur-ZJAY") is likely to benefit from growing demand for oilfield services technology, particularly in the high-technology-dependent Middle East, Africa and Eastern Europe regions.
Further, although North American margins have narrowed somewhat to-date in 2008, international margins remain large. Overall, in 2008 analysts see SLB's margins totaling 28% -- still a very healthy figure -- with revenue growth of 12-14% for 2008, and 16-20% for 2009.
Additional positives: Look for Schlumberger to continue to register solid revenue gains in the Eastern Hemisphere, as the company concentrates on higher-growth regions. The Reuters F2008/F2009 EPS consensus estimates for SLB are $4.80/$5.88.
"When it comes to oil services, the world's most dominant company by far is Schlumberger (NYSE: SLB)," says Stephen Leeb, editor of The Complete Investor. Here, he looks at this "extraordinary" company.
"The question isn't whether inflation will worsen-it's how to protect yourself. Major and obvious lifelines we've stressed include precious metal and commodity companies, especially ones able to boost production.
"For additional inflation insurance, look to what Warren Buffett likes to call 'great companies.' These have two crucial characteristics that allow them to take inflation in stride.
"First, a great company is so dominant in its market that it can pass rising costs along to its customers. And second, it's in a market growing faster than the world's economy.
MOST NOTEWORTHY: Ford, Imperial Tobacco and Schlumberger were today's noteworthy upgrades:
Soleil upgraded Ford Motor Company (NYSE: F) to Buy from Sell as they expect improved sentiment towards shares given new product launches, cost cutting efforts, North American capacity reductions, and better than expected performance on the cash side.
Imperial Tobacco Group Plc (NYSE: ITY) was raised to Buy from Hold at Citigroup to reflect FX benefits and pricing in continental Europe.
Morgan Stanley upgraded shares of Schlumberger Limited (NYSE: SLB) to Overweight from Equal Weight following the company's Q1 results, as they expect consensus estimates to move higher over the coming quarters.
After hitting a one-year low of $28.40 last January, the stock hit a one-year high of $41.95 in October. This morning, HAL opened at $32.36. So far today the stock has hit a low of $31.55 and a high of $32.90. As of 10:55, HAL is trading at $31.65, down $1.65 (-4.9%). The chart for HAL looks bearish and steady, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.
For a bearish hedged play on this stock, I would consider an April bear-call credit spread above the $40 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 4.2% return in 3 months as long as HAL is below $40 at April expiration. Halliburton would have to rise by more than 28% before we would start to lose money.
HAL hasn't been above $40 since November and has shown resistance around $39 recently. This trade could be risky if the price of oil bounces back and goes above $100, but that won't be likely to happen unless the economy gets turned around quickly.
Brent Archer is an options analyst and writer at Investors Observer. At publication time, Brent neither owns nor controls positions in HAL or SLB.
Schlumberger reported that its quarterly profit climbed to $1.38 billion, helped by increased demand in the Eastern Hemisphere and Latin America. The oilfield services company's earnings per share numbers came in at $1.12 per share. Excluding special items, Schlumberger showed earnings of $1.11, missing estimates by two pennies.
The company's results did show a respectable jump in revenue of 17% to $6.25 billion, up from $5.35 billion a year earlier. The rise in revenue came from Latin America where sales rose 40% and from the Middle East and Asia where sales saw an increase of 30%. On the other hand, North American sales dipped by 7% in North America. Analysts had been expecting to see Schlumberger show a revenue of $6.14 billion.
Another earnings season crunch has begun, though with a level of uncertainty and ennui, as Jim Cramer and others have pointed out here on BloggingStocks. Several of the big banks are reporting soon, but among other companies reporting this week are Schlumberger Ltd. (NYSE: SLB) and Johnson Controls Inc. (NYSE: JCI). Here is a quick peek at these two companies.
Schlumberger hasn't missed quarterly earnings expectations since 2004. When it reported third-quarter results back in October, its $1.09 earnings per share beat the consensus estimate of analysts surveyed by Thomson Financial by two cents, as well as the actual 81 cents per share in the same period of 2006. For the current quarter, analysts expect earnings of $1.13 per share, or $4.20 for the full year, up from $3.04 in 2006.
Schlumberger's 56.9 percent earnings per share growth forecast for the next three to five years is better than the industry average and the S&P 500. The analysts' consensus recommendation has been to buy Schlumberger for at least six months. The share price rose to a 10-year high of $114.84 in October, but has traded mostly in the $90s since then.
For news that could influence the earnings results, check out BloggingStocks' Schlumberger coverage.
After hitting a one-year high of $114.84 in October, the stock has fallen a bit over the past month. SLB opened this morning at $91.90. So far today the stock has hit a low of $90.74 and a high of $92.95. As of 10:50, SLB is trading at $91.63, up 79 cents(0.9%). The chart for SLB looks neutral but deteriorating, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.
For a bullish hedged play on this stock, I would consider a December bull-put credit spread below the $80 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 7.5% return in just 5 weeks as long as SLB is above $80 at December expiration. Schlumberger would have to fall by more than 12% before we would start to lose money. Learn more about this type of trade here.
SLB hasn't been below $80 since June and has shown support around $89.50 recently. This trade could be risky if the price of oil comes down off its near-record highs, but even if that happens, this position could be protected by support the stock formed between $85 and $90 in August. Plus, some support could be provided by the stock's 200-day moving average, which is currently at $85 and rising. Brent Archer is an options analyst and writer at Investors Observer.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in SLB.
In the 1989 motion picture "Dead Poets Society," actor Robin Williams, playing school teacher John Keating, inspires his new students to take advantage of opportunities presented in life, to "seize the day." Well, if Robin Williams will allow, now is the time to "seize the day with Schlumberger." (Pronounced: shlum-bur-ZJAY.)
Oilfield services company Schlumberger Ltd. (NYSE: SLB) is likely to benefit from growing demand for oilfield services technology, particularly in the high technology-dependent Middle East, Africa, and Eastern Europe regions.
Further, although North American margins have narrowed somewhat so far in 2007, international margins widened. Overall, in 2008 analysts see SLB's margins totaling 30% -- still a very healthy figure -- with revenue growth of 12-14%.
"In recoveries from panic selloffs in the past, the energy patch has tended to outperform the S&P 500," notes energy sector specialist Elliott Gue.
As the second quarter earnings crunch begins in earnest this week, the bear market has investors jittery and prognosticators spinning out dire warnings. In the wake of mixed results from 
Schlumberger
With the economy facing soaring crude oil prices for the past year, consumers and drivers have seen a major impact on their savings. It could seem as though the good old times are over. Gasoline at $4 a gallon is not something we can ignore, and if we take into account that Americans consume nearly 40% of the world's gasoline, you can see where the problems begin. So the surge in oil prices came with an imminent effect on consumers, who had to cut back on their spending..gif){kind=logo}
Shares of 
In the 1989 motion picture 
Comfort Zone Investing: Getting beyond today
Stock picks and pans for troubled times: RIMM, ED, ISRG, GLW, LEA, SLB, GOOG ...
Is Berkshire Hathaway better than S&P Index?
