The investment case is that combining the aggressive capex spending plans of the large oil companies with the declining yield of legacy wells will mean strong demand for oil services for the forseeable future. Match the positive long term prospects with the recent pullback in share prices and you have a buying opportunity.
Two Oil Services ETFs provide investors a way to take a position in Oil Services with instant diversification and at a low cost.
PowerShares Dynamic Oil and Gas Services Portfolio (Amex: PXJ) tracks an index of 30 U.S. companies that assist in the production, processing and distribution of oil and gas. Managers select the companies with the greatest capital appreciation potential based on a variety of investment merit criteria including fundamental growth, stock valuation, investment timeliness and risk factors. The index is rebalanced quarterly.
Top holdings as of March 25 include McDermott International (NYSE: MDR), Baker Hughes (NYSE: BHI), Noble Corp (NYSE: NE) and Halliburton (NYSE: HAL). For more information, see the PowerShares website.
Merrill Lynch’s Oil Services HOLDRS (Amex: OIH) tracks an index of 17 companies that provide drilling, well-site management and related products and services for the oil service industry. Top holdings as of March 25 include Transocean, Schlumberger and Halliburton. For more information, see the HOLDRS website.
OIH and PXJ vs. S&P 500 – 12 month chart