Bears Make a Case for the Bull

Chesapeake Energy

In energy, Litle likes Chesapeake Energy (CHK - commentary - Cramer's Take), an Oklahoma City-based natural gas producer that did a commendable job of snapping up U.S. natural gas reserves when they were a lot cheaper. Like many energy analysts, Litle says an underlying shortage of natural gas in North America will support elevated prices, since all of the "easy pickings" have been exploited in the past few decades.

Litle believes that plans to extract oil from Canadian tar sands will also support prices because the process will "suck up huge amounts of natural gas." Ultimately, he believes Chesapeake could be the takeout target of a major such as BP (BP - commentary - Cramer's Take) or Exxon Mobil (XOM - commentary - Cramer's Take).

Walter Industries

Walter Industries (WLT - commentary - Cramer's Take), a coal producer that just spun off Mueller Water Products (MWA - commentary - Cramer's Take), is another top pick at Outstanding Investments.

Like many coal producers, Walter Industries has retreated because the lower price of oil has dragged down the price of coal. "All the alternative-energy stocks got hit when oil got hit," says Litle, "but the pessimism is priced in to the stock."

He believes oil will trade between $60 and $70 a barrel over the next two years, in part because of demand from developing-world economies, especially China, which is building a strategic petroleum reserve. "Asia and the developing world are a lot stronger than people think," says Litle. "As that sinks in, coal stocks will really come back."

Cemex

An infrastructure play Litle likes is Cemex S.A.B. de C.V. (CX - commentary - Cramer's Take), a Mexico-based cement producer that operates on five continents and in the Middle East. Besides the obvious boost from developing countries needing to upgrade their infrastructure, as those same economies grow, a big priority will be securing the natural resources they need, in regions such as South America and Africa. "They have to build roads and ports and infrastructure to extract the resources and get them out," says Litle.

Jacobs Engineering Group (JEC - commentary - Cramer's Take) should also benefit, since it is one of the "top players" in engineering design and construction services around the globe.

Check back tomorrow for bearish thoughts from Ruff Times editor Howard Ruff in part 2 of this article.

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At the time of publication, Brush was short Chesapeake Energy puts, although positions may change at any time.

Brush is an award-winning New York-based financial writer. In addition to writing for RealMoney, he has a weekly market column on MSN Money called Company Focus, and a column called Insiders Corner at InvestorIdeas.com. Brush has covered business and investing for The New York Times, Money magazine and the Economist Group. He studied at Columbia Business School in the Knight-Bagehot Fellowship program and the Johns Hopkins School of Advanced International Studies. He is the author of Lessons From the Front Line, a book that offers insights on investing and the markets based on the experiences of professional money managers.

Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Brush appreciates your feedback; click here to send him an email.