'Unloved' Energy Shares Ready to Rally - TheStreet

NEW YORK (TheStreet) -- When the BP (BP) - Get Report oil rig exploded, energy stocks sank. Among the worst performers were companies that depend on offshore oil fields.

The losses attracted the attention of Robert Stimpson, manager of

Rock Oak Core Growth

(RCKSX) - Get Report

. Stimpson bought shares of

Transocean

(RIG) - Get Report

, owner of the damaged platform. The fund manager also grabbed depressed shares of

Weatherford International

(WFT) - Get Report

and

Schlumberger

(SLB) - Get Report

, leading providers of services for oil fields.

"Today, energy stocks look as unloved as financials were in 2008," Stimpson says. "Financials staged a huge rally off their lows, and eventually energy stocks will also rally."

Stimpson practices a distinct form of aggressive-growth investing. He owns a mix of fast-growth companies and extreme contrarian plays that may only suit investors with strong stomachs. The strategy tends to soar in bull markets. During the rally of 2009, Rock Oak gained 50% and outdid 92% of its large-growth competitors, according to Morningstar.

But the fund can trail badly in downturns when investors flee risky assets. In 2008, Rock Oak dropped 47%, lagging 91% of competitors.

Besides Rock Oak, Stimpson runs two other aggressive funds,

Black Oak Emerging Technology

(BOGSX) - Get Report

and

River Oak Discovery

(RIVSX) - Get Report

, a small-growth fund. The funds are part of Oak Associates Funds, which run aggressive strategies.

For many investors, aggressive funds have proved to be dangerous choices. In the late 1990s, novice investors piled into high-risk funds after they had scored huge gains. The new shareholders arrived just in time to suffer outsized losses that occurred when technology stocks collapsed.

But aggressive funds can be sound holdings if they are used correctly. The best strategy is to buy the funds when they are out of favor -- and then hold for the long-term. For patient investors, a top aggressive choice can help to diversify a portfolio, and some funds deliver solid long-term returns. During the past three years, all three of Stimpson's funds have beaten the S&P 500 by wide margins.

Stimpson claims that his energy stocks are not as risky as they may appear. While the moratorium on deepwater drilling will hurt sales in the Gulf, the search for oil will eventually resume, he says. "There is no moratorium on the demand for oil," he says.

Despite problems in the Gulf, all three of his favorite energy stocks remain profitable with sound businesses around the world. Transocean owns rigs that are working off Brazil and Africa. Schlumberger and Weatherford provide equipment and supplies in many fields.

In another contrarian move this year, Stimpson has been buying Chinese Internet stocks. He became interested as the Chinese market tanked, and technology stocks fell hard. A favorite Internet stock is

Sohu

(SOHU) - Get Report

, which provides search and content. As more Chinese begin using the Internet, sales are climbing at a double-digit pace. The stock sells for a meager forward price-to-earnings ratio of 10.

"Buying this stock is like getting Yahoo in 1995 when the Internet was just taking off," says Stimpson.

Another fast-growing Chinese holding is

Baidu

(BIDU) - Get Report

, a search-engine company. The company lost a major competitor when

Google

(GOOG) - Get Report

recently announced that it was leaving the country.

While the recession has hurt casinos, Stimpson is keen on two gaming stocks,

International Game Technology

(IGT) - Get Report

and

WMS Industries

(WMS) - Get Report

. The companies provide systems that improve the efficiency of slot machines. The systems can connect many slot machines to a single server. Then with a mouse click, a casino can change all of its nickel slots to $5 video poker games. Casinos in Las Vegas and Macau are adding the technology to improve their machines.

"It used to take hours to change machines," says Stimpson. "Now casinos make changes in seconds."

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Stan Luxenberg is a freelance writer who specializes in mutual funds and investing. He was formerly executive editor of Individual Investor magazine.