Tuesday, August 01, 2006

Oil & Gas industry is not screaming BUY

I've been spending quite a bit of time trying to find some good way to ride the oil & gas industry. While analysis suggests that oil prices are not going to "shock" upward from their current highs, the current inflation numbers show that the energy sector is in inflation. When one sector is experiencing rising prices and others are not, and the Federal reserve is ready to fight inflation, you want to have some money in the inflationary sector. Rising interest rates damp out the industries that are not seeing rising prices much worse than those that are.

This gives us a strong interest in finding a way to invest in energy. I started by analyzing Seacor Holdings [CKH], an oil services company, but found it a SELL. In the last week I've also analyzed Ensco International [ESV], Rosetta Resources [ROSE], and Rowan Companies [RDC].

Right now I've eliminated CKH and ROSE from consideration. ESV and RDC still have some possibilities but both are so dependent on outside influences that they seem very risky to call. If you have an appetite for risk and want exposure to oil & gas I consider these among the least overpriced.

I am still working my way back and forth through the financials, though, and am not willing to put a BUY or SELL on them yet. Maybe soon. Any insight from others who have looked at these companies is welcome. As always here at the Finance Wonk, my goal is simply to find the real answer because I always put my own money where my predictions go.

Invest well,

FW
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