Oil Services Stocks at Bargain Prices

Is now the time to buy oil services stocks? That’s what the smart money thinks.

We particularly like Rowan (NYSE: RDC) and BJ Services (NYSE: BJS)

Growth Stock Wire writes:
Rodriguez’s FPA Capital Fund has 32% of its holdings in just five oil and gas service companies (as of 3/31/09). This is a HUGE weighting toward one sector for a mutual fund… so Rodriguez and his crew obviously think oil services are cheap. His top picks right now are ENSCO, Patterson-UTI, Rowan, BJ Services, and Pride International.

Rodriguez focuses on four simple criteria: free cash flow, strong balance sheet, good management, and an operational “moat” around the business. He only buys those businesses when the price ratios, like price to earnings or price to book value, are exceptionally low.

That’s why he’s buying oil services today. The entire sector recently traded for just 1.2 times the price of its equipment (book value). At its recent peak, the group traded for four times book value.

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