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3 Energy Stocks I Really Want to Buy

By Matthew DiLallo - Apr 20, 2013 at 9:03AM

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If oil keeps falling, it could take some top-tier service and equipment stocks down with it. Here are three that top my buy list if that happens.

It's always a good idea to have a watch list of companies you'd like to buy if the price was right. While my portfolio is heavy on oil and gas producers, it's a bit lighter on those companies that service the industry. These "pick-and-shovel" plays don't carry the same operational risks as an exploration and production company that yields a more stable profit picture. That being said, the share prices are subject to the volatility in the price of oil, meaning that investors could be able to pick up shares on the cheap if oil falls further.

Core Laboratories (CLB 0.54%)
I've been watching Core Laboratories for over a month now, hoping for a really big pullback so I could add shares to my portfolio. The stock recently was starting to come down off its highs as the price of oil dropped. Unfortunately, for me at least, the hopes of snagging shares cheaper vanished, with shares jumping after its first quarter earnings release.

The company reported its most profitable quarter ever, with both revenue and earnings at all-time highs. Meanwhile, the company's share count is now at a 15-year low thanks to meaningful share repurchases. While I'd love to own shares of the company behind the science of oil and gas production, I'd like to buy it much cheaper, and that will only happen if oil takes a big dive.

FMC Technologies (FTI 0.38%)
I feel much the same way about FMC Technologies. Its subsea services business is in the right place at the right time given how active drillers are in the deepwater. The company just signed a four-year deal with Brazil's Petrobras to provide it with subsea services. The deal, which extends the two companies' decades-long relationship, is just one of many that FMC has signed over the past year.

My one concern with FMC Technologies is that oil-field service giant Schlumberger is teaming up with Cameron to compete in the subsea marketplace. Given Schlumberger's deep pockets and Cameron's expertise, the joint venture that's being created, called OneSubsea, poses a real threat.

The good news is that FMC Technologies continues to announce new deals like the one from Petrobras. That means that, even with this new entrant, it's able to continue to compete and win in the marketplace. Unfortunately, that means shares still remain at prices higher than I'd rather pay, so I need a deeper dive in the price of oil before shares become a tempting buy.

National Oilwell Varco (NOV 1.65%)
It's been called by some investors as the only energy company you'll ever need. Those in the industry sometimes refer to it as "No Other Vendor," because it sells virtually everything the industry needs. No matter what you call it, National Oilwell Varco is the king of oil-field equipment.

What's a bit different here is that the company is actually reasonably priced, if not fairly cheap. At about 11 times earnings, the company is trading at about a third of the earnings multiple of FMC Technologies and Core Laboratories. This is likely a reason why it has been one of Warren Buffett's favorite energy companies lately. The only difference here is the growth rate, as both of those companies are projected to grow faster that NOV. Still, National Oilwell Varco is a dominant company trading at a cheap price, and would be an even more compelling buy if the price of oil falls any further.

Key Foolish takeaway
Having a wish list of great stocks to buy is one of the best things to be doing in a volatile market. Sometimes, the market can hand you a gift, and you just have to be ready for it. Now that I've shared my list, I'd love to hear what oil stocks are on your watch list. Drop me a note in the comment box below. 

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Stocks Mentioned

Core Laboratories N.V. Stock Quote
Core Laboratories N.V.
CLB
$26.02 (0.54%) $0.14
National Oilwell Varco, Inc. Stock Quote
National Oilwell Varco, Inc.
NOV
$19.12 (1.65%) $0.31
TechnipFMC plc Stock Quote
TechnipFMC plc
FTI
$8.02 (0.38%) $0.03

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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