Can oil-service companies prosper at $25-per-barrel oil?
We believe they will prosper in both financial results and stock-price performance. If you purchased stocks like Exxon Mobil or Chevron [CHV] back when oil was $12 a barrel, you would have made money, but you would have underperformed the S&P 500. We believe the reason why these stocks have not performed as well as the rise in oil prices has to do with investor sentiment, with oil at $35 a barrel. It seems that no one believes oil will stay at this high price. Therefore, if oil prices pull back to $25 a barrel, which is a healthy level for oil companies, I think investors will feel more confident in investing in these stocks. If we get a more realistic and stable oil price, look for some of the major oil-company stocks to outperform.
