NEW YORK (TheStreet) -- I was talking to Stephanie Link today about materials stocks and the price of oil. Stephanie thinks that many of her readers are trying to bottom-pick some materials stocks that have been hurt by falling oil prices. I agree with her that it's too soon to try and find cheap winners in that space.
Many of the biggest winners in 2013 and early 2014 in materials stocks were a result of oil and other commodity prices that were high and steady. Since the collapse of commodities many of those favored stocks including Fluor (FLR) - Get Report , Foster Wheeler (FWLT) , Chicago Bridge and Iron (CBI) and KBR Inc. (KBR) - Get Report have collapsed as well.
Stephanie asked me my take because many of these companies have announced huge capital expenditure budgets for 2015, which has inspired many of her subscribers to ask whether this is the time to buy what look like value-priced shares.
I agree with her that we are just beginning to see the results of a long and depressed oil price and general commodity deflation. Particularly you see this in the numbers for rig counts on drilling, where permitting requests are already down 17%. Lower permits lead to lower spends and lower production, although none of this is immediately apparent.
You also notice the movement of the bonds on some of the less-well-financed players in oil and materials that are showing tremendous stress and volatility. Many of these issues were tremendously overpriced as investors searched for yield in a zero-rate environment. But now that these bonds are beginning to be fairly priced, both Stephanie and I believe that they have a long, long way to fall before they find a new correct level.
While that is happening, the common shares of these companies is not a place to feel safe.
I talk more with Stephanie about the oil market and materials stocks in the video above.
At the time of publication, the author held no positions in any of the stocks mentioned.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.