Big Money's Betting That Oil Will Skyrocket

One of the great maxims of traders and Wall Street pros is to follow the "smart money."

I don't support the thesis that institutional shoppers tend to make smarter investing decisions, but many of you who've read my ruminations on insider buying say you'd also like to know how the Big Money is betting. Your wish is my command.

Next up: Schlumberger (NYSE: SLB). Are institutions bullish or bearish when it comes to this oilfield services provider?

Foolish facts

Data current as of Jan. 21.

Macroeconomic forces may help to explain why Fools love Schlumberger. Rising oil prices could provide incentives for oil explorers to deploy rigs, which would create demand for services from companies like Schlumberger and Halliburton (NYSE: HAL).

Demand could persist for years. For the first time in years, leaders of Europe's central bank are publicly contemplating moves to fight rising food and energy prices on the continent, according to reporting by The Wall Street Journal. Heavy consumption is at least one of the forces conspiring to keep oil prices high in Europe and around the world.

"Oil is headed back up. $100 per barrel oil will happen in 2011, and at that price this oil industry player will be making lots of money," wrote Foolish investor kpscott in December.

Institutional ownership history

Source: Capital IQ, a division of Standard & Poor's.
*Indicates the number of shares owned.

Big Money investors appear to agree with that thesis. Following a dip during the Great Recession of 2008, institutions have been steadily accumulating shares of Schlumberger. BlackRock and Vanguard, in particular, have been big buyers over the past year.

Their gamble's paid off. Schlumberger is up roughly 28% over the past year, a solid market-beater. Can the rally continue? Foolish colleague Bryan White thinks so.

"Schlumberger is the most leveraged major services company to exploration, international growth, and the difficult deepwater and unconventional plays. All these areas of expertise make it a solid pick as we head into 2011 and beyond," Bryan wrote in announcing Schlumberger's entry into the Fool's Rising Stars portfolio.

Competitor and peer checkup

Source: Capital IQ. Data current as of Jan. 21.

Judging only by this table, I'd say that Allis-Chambers Energy and W.W. Grainger have the best ownership profiles. But Schlumberger's own makeup is hardly bad. Institutions own less than 80% of the shares outstanding, which means there's room for more Big Money buyers of the stock.

Insiders may not own much, but that's also understandable. Schlumberger has been around since before the Great Depression. The company's founders are long gone. Fortunately, its growth opportunity appears to be just beginning.

As Bryan points out, Schlumberger is the market leader and unmatched by small competitors in terms of global reach. That should help tremendously if explorers take to far seas and sands in search of new oil and gas patches to tap.

Do you agree? Disagree? Let us know what you think about Schlumberger using the comments box below. You can also recommend other stocks for me to evaluate by sending me an email, or replying to me on Twitter.

What will be this year's top stock? We've got a good idea. The Motley Fool has created a brand new free report called "The Motley Fool's Top Stock for 2011." In it, we reveal the little company set to profit from the broadband Internet expansion. Get instant access by clicking here -- it's free.

Interested in more info on the stocks mentioned in this story? Add Allis-Chalmers Energy, Halliburton, National Oilwell Varco, Newpark Resources, Schlumberger, TETRA Technologies, or W.W. Grainger to your watchlist.