1 Oil Stock to Buy This May

Right about this time of year you start to be reminded of that old Wall Street adage. You know the one I'm talking about: "Sell in May and go away." Sometimes it works and sometimes it doesn't. However, with the market hitting new highs, the pull to pull away from the market is even greater this year.

Here at the Motley Fool, we eschew market timing. We'd rather buy great businesses and hold them, well, forever. That's why I want to challenge you this May to buck the conventional Wall Street wisdom and instead of selling, go out and buy a great stock that you can hold on to for the next few years.

With that in mind, we recently held an investor roundtable at the Motley Fool in which each analyst was tasked with selecting one stock worthy of your investing dollars. In selecting my one stock to buy in May I went with a familiar name that truly dominates its market. That stock: National Oilwell Varco (NYSE: NOV  ) . Let's drill down into its business and why I think it makes a great buy today.

Backlog and building momentum
In some regards National Oilwell Varco had a down quarter. While revenue jumped 23% year over year it was down 7% over last quarter. Still, beneath the noise were several positives, and topping that list is the company's record order backlog of $12.9 billion. This exceeds the previous record set in 2008 by over a billion dollars. That speaks of good things ahead.

Further, the company noted on its conference call that its business typically lags that of both services providers and drilling contractors by a quarter or two. That bodes really well when you consider the numbers being put up by the oil services sector.

For example, Halliburton (NYSE: HAL  ) saw record first-quarter revenue of $7 billion. Declining rig counts and pricing pressures in North America were still more than offset by the company's international operations. Meanwhile, Schlumberger's (NYSE: SLB  ) results seemed to mirror National Oilwell Varco's in that its revenue was up over the year-ago quarter but slipped sequentially. Again, though, the story here was strength internationally with weakness in North America. Further, both companies are very optimistic about the future and neither see any signs of a business slowdown. 

Then you have Core Labs (NYSE: CLB  ) which reported its most profitable quarter ever. Driven by worldwide deepwater developments, the company can be a real leading indicator of future capital spending as it analyzes reservoir rocks and fluids to help exploration and production companies optimize projects. Core sees North America stable while international markets will grow at around 7%. The fact that companies are willing to spend on its services indicates that the industry's future equipment needs might pick up, for the reservoirs that Core analyzes can require a lot of capital to develop.   

This all speaks of good things to come for National Oilwell Varco. It means oil and gas companies are spending money to grow and that growth will require additional equipment purchases. That's where NOV can step forward in a way that "no other vendor" can; it really is the industry's one-stop shop for all its drilling needs. 

Why buy now?
While the market has been heading higher this year, shares of National Oilwell Varco haven't been keeping up that same pace. That has put this premium business on sale as its shares trade at a very reasonable 11.7 times earnings. Over the next five years analysts are projecting earnings growth of just over 12% meaning you can get this solid business for a very fair price. When you put it all together, you can buy this premium business for an excellent price and enjoy years of growth as the business continues to perform.

Further, like I mentioned, the business appears to be poised to accelerate over over the next couple of quarters. As it does it could mean that analysts' estimates were low, meaning that buying today could prove to be acquiring at an exceptional price. At some point this premium business will be repriced by investors to reflect its true capabilities to capture the major growth opportunities in the oil and gas industry. 

Foolish bottom line
The biggest risk here is that oil prices decline and dry up the capital budgets at oil companies. I could be wrong, but right now I don't see a big catalyst that would drive oil prices too much lower. Demand from China should continue to be robust and we're still a long way away from a green economy here in the States. That's why I think investors will do very well investing in National Oilwell Varco over the long term. 

Not only that but National Oilwell Varco is perhaps the safest investment in the energy sector due to its industry-dominating market share. This company is poised to profit in a big way; its customers are both increasing the number of new drilling rigs and updating aging fleets of offshore rigs. If you'd like to drill down even deeper to help determine if it could be a good fit for your portfolio, you're invited to check out The Motley Fool's premium research report featuring in-depth analysis on whether NOV is a buy today. For instant access to this valuable investor's resource, simply click here now to claim your copy.


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