5. Valero Energy (VLO)
Company profile: Valero owns sophisticated refineries that can process cheap, lower-quality oil into a high-value product. That gives the company a big cost advantage versus its competitors, some of whom can only process that much higher-priced light crude. Fidelity is its second-largest shareholder, with a 4.2% stake.
Share performance: down 10% this year; 10-year average annual return of 10%.
4. Kinder Morgan Energy Partners (KMP)Company profile: The company operates more than 37,000 miles of pipelines for oil and natural gas transport and owns 180 terminals that store liquids, gases, and dry-bulk materials, such as coal, throughout the U.S. Kinder Morgan announced a merger with the oil pipeline giant El Paso early this year, which is still awaiting regulatory approval, but it is expected to be approved. It creates a series of complex partnerships, but given the exclusivity of the pipeline and storage facilities it now controls, including the largest natural gas pipeline operation in the country that serves every major market, the company has tremendous leverage to raise prices as demand for natural gas grows. 2011 Return: up 24% this year; it has a 15-year average annual return of 21%. Its shares carry a 5.78% dividend yield. 3. Oil States International (OIS) Company profile: This $4 billion market-cap company provides the oil exploration industry everything from rigs and rental tools to pipes. About 60% of the firm's revenue comes from North America. Fidelity is by far the largest individual shareholder, with a 7.4% stake. Share performance: up 17% this year; it has a 10-year average annual return of 23%. 2. Noble (NE) Company profile: The company operates 76 offshore rigs internationally and has several new ones under construction. About 60% of its customers are foreign national oil companies. Noble also provides engineering and consulting services. Fidelity is the second-largest shareholder with 6.2% of its shares. Share performance: down 11% this year; 15-year average annual return of 8.2%. 1. Rowan Cos. (RDC) Company profile: The company is a contract driller with oil rigs that can drill deeper for oil and natural gas than the competition and so allows it to charge higher day rates. Fidelity is the largest shareholder, with a 5.9% stake of this $4 billion market-cap company. Share performance: down 9% this year; 10-year average annual return of 6.2%. >>To see these stocks in action, visit the 15 Stocks to Ride the Energy Boom portfolio on Stockpickr.
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