Buckling Up to Ride the Oil Roller Coaster

Edwards likes Baker Hughes best because it's unburdened by the asbestos taint of Halliburton or the financial problems of Schlumberger.

"It has no radiation hanging over it," said Edwards, whose firm owns stock in the company.

Still, the clear favorites of most energy analysts are the biggest names in the sector -- companies such as BP (BP ADR), ExxonMobil (XOM) and Royal Dutch/Shell (RD), all of which boast pristine balance sheets and more profits than they can reasonably spend. The share prices of all three majors have been punished by investors betting on a fall in energy prices. But experts believe the stocks will recover -- as they always do -- with the overall economy.

In the meantime, they recommend parking money in the majors for their dividends alone. All three of the big oil giants pay dividends that fly past those offered by S&P companies in general.

"Everybody has been trying to come up with ways to play the price of higher oil, and the stocks just haven't cooperated," said Dan Gillespie, manager of the energy fund at Rydex. "If I were an individual investor, I'd be looking at this dividend yield as a good play."

Fadel Gheit, an energy analyst at Fahnstock, agrees. He believes the big three -- in addition to ChevronTexaco (CVX) -- represent solid, long-term investments. And he urges investors to take their eyes off of rocketing energy prices so they can see the values before them.

"It's like driving down the highway," said Gheit, who owns stock in all the majors. "You don't put your nose in the dashboard if you want to see what's coming ahead."

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