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Gulf Repair Job Tougher Than Expected

In addition, inspection companies like Oceaneering International (OII - Get Report) and service companies like Superior Energy Services (SPN - Get Report) are also profiting from the need for repair and support services in the Gulf.

Volatility the Norm

The challenges to supply combined with strong demand for services suggest that the positive outlook for energy stocks should remain in place in the coming months. That said, recent action in energy equities has unsettled many investors who saw 10% to 20% of their energy holdings evaporate.

The shoulder season -- the period between high summer cooling demand and the beginning of winter heating season -- is a traditionally volatile period for energy stocks. And, with the meaningful acceleration in energy stock prices as a result of the storms and high commodity prices, it shouldn't be a surprise that they can move just as fast in the other direction.

A consistent theme in my advice about the sector -- and investing in general -- has been to stick to your discipline and understand your tolerance for risk and volatility. There is an opportunity ahead to re-enter the sector or build additional positions. That said, there is also likely some additional choppiness ahead. However, with earnings on the horizon and strong outlooks likely from industry leaders like National Oilwell Varco (NOV - Get Report) and Nabors (NBR - Get Report), third-quarter results and year-end outlooks should provide a jump start for many of the energy stocks.
Christopher S. Edmonds is vice president and director of research at Pritchard Capital Partners, a New Orleans energy investment firm. He is based in Atlanta. At time of publication, neither Edmonds nor his firm held positions in any securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. While Edmonds cannot provide investment advice or recommendations, he appreciates your feedback; click here to send him an email.

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EPL $37.73 0.69%
HOS $7.08 -5.50%
NOV $27.58 -2.90%
OII $28.59 -2.50%
NBR $6.10 -7.40%


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