Oil Stocks to Buy as Gas Prices Plunge

I'm going to recommend two big, steady companies whose stocks have a good shot at rising 50% over the next 18 months, and two well-managed but little-known small companies that have a shot at doubling or tripling over the next 18 months.

Service Master

Let's go with the potential tripler first, since that's where the greed lobe of your brain perked up. First is Allis-Chalmers Energy(ALY Quote), an acquisitive Houston outfit that offers a range of drilling, production and rental services in the Gulf of Mexico and Latin America, focusing on services its larger competitors have abandoned.

Allis-Chalmers helps with tasks such as horizontal drilling in Texas, changing out drilling pipe off Louisiana's coast and providing the coiled tubing needed to snake down a gushing well to inject anti-corrosion chemicals. Demand for these services is growing faster than new drill-rig construction as oil companies attempt to maximize output from their reserves.

Allis-Chalmers has been successfully acquiring private businesses to fill these niches and helping them work together as a unit. Its savvy, frugal executive team has acquired 14 companies in the past five years, including two in the past month, with complementary services that are expected to boost earnings per share immediately and not just add revenue.

These acquisitions have provided Allis-Chalmers with tremendous cross-selling opportunities -- such as selling compressed-air drilling services to a company to which it is renting pipes -- boosting its return on capital toward the impressive 20% mark.