By Joseph Lazzaro – It goes without saying that I favor the oil sector, including drillers and oil servicers. Breakthrough energy form discovery aside, oil will continue to be the world's most important commodity for at least 15-20 years, and probably for longer than that. Hence, I'm Reiterating my Buy rating for Oceaneering International (NYSE: OII), first recommended on April 7, 2009 at a price of $38.01.
Oceaneering is rebounding roughly in-line with the recovering U.S./global economies, with its remotely operated vehicle (rov) business the key driver. If you purchased OII back in early April, you're up about 40%: congrats! Hence, with a P/E of 14, OII is not as cheap as it was then, but plenty more upside remains. However, a position should be established now to have a good chance to achieve out-sized gains. The First Call FY2009/FY2010 EPS estimates for OII are $3.37 to $3.54.
Stock Analysis: Oceaneering is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 50% position in OII now; then buy another 25% in three months, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of your OII position before October 2009. Sell/Stop Loss if you were to buy shares in this company: $22.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.