Roberto Pedone

WINDERMERE, Fla. ( Stockpickr) -- Almost any stock that has the word "oil" in its name has been absolutely beaten down due to the BP ( BP) oil spill in the Gulf of Mexico. Investors have been dumping the oil-related stocks now and asking questions later out of fear that they could be holding the next BP -- or even something worse.

Of course, the market has a tendency to overdo the selling on the downside in times of a crisis. That could be the case right now in the oil patch since many of the related stocks have been sold off to very compelling valuations. During the last three months, oil drillers have been crushed, with Transocean ( RIG) shares down 39%, Diamond Offshore Drilling ( DO) down 28%, Rowan ( RDC) down 20% and Noble ( NE) down 23%. All of these names are presenting investors with an opportunity to buy at very cheap valuations. For example, Transocean is trading at a P/E of just 5, and Noble is changing hands at a P/E of only 6.

The smart money on Wall Street is also starting to find values among the offshore drillers. On Monday, Greenlight Capital, the hedge fund firm run by David Einhorn, acquired a 5% stake in London-based offshore driller Ensco ( ESV). According to SEC filings, Einhorn bought 7.4 million Ensco American depositary receipts. Clearly, Einhorn sees a big opportunity in Ensco, with the stock down 14% in the last three months.

Before we take a look at some other oil-related stocks that could be great buying opportunities, let me say that one stock in the space I would continue to avoid is the cause of the sector's problems in the first place, BP. BP has seen a tremendous run recently, surging more than 33% in just the last couple of weeks, but I suspect that most of that move has been short-covering in anticipation of the company capping the well. What's troubling about BP is that it appears to be conducting a fire sale of its assets instead of rebuilding its brand. Not to mention that nobody really knows the true amount of legal liabilities the company is going to face until the disaster in the Gulf comes to an end.

In fact, I could see the stock actually selling off once the well is capped. This could be a buy-the-rumor-sell-the-news type of moment for BP if it can successfully stop the oil from spilling into the Gulf.

So which oil-related stocks should investors seize the moment with and consider buying

A name you might want to put on your radar here is Tidewater ( TDW), a provider of offshore supply vessels and marine support services to the offshore energy industry through the operation of offshore marine service vessels. Let's face it: The moratorium on offshore drilling in the Gulf of Mexico isn't going to last forever. In fact, the ban should end in six months, so investors need to start looking for the best plays ahead of that event.

Tidewater is an extremely cheap stock, trading at a P/E of 8, and it has a 2.5% dividend yield. Shares of Tidewater have been beaten down more than 15% in the past three months, and even insiders are starting to see value. Two directors at the company recently purchased around $300,000 worth of stock. Keep in mind that if there is a meaningful rebound in Tidewater, the stock could soar significantly higher due to its small float of 51 million shares and large short interest of more than 13% of the float.
Who Owns Tidewater?

Another name worth a look is Oceaneering International ( OII), an oilfield provider of engineered services and products to the offshore oil and gas industry, with a focus on deepwater applications. This stock has been absolutely hammered over the past three months, with shares down a whopping 26%. Oceaneering is the company that makes the robots that are filming the oil spill and are deployed to try to fix BP's leaking pipe. What's interesting is that the company's deepwater ROVs were designed to support drilling operations, not to repair major blowouts. Clearly the company is going above and beyond the call of duty with its highly advanced equipment.

If you're looking for a high-quality small-cap play on the drilling sector, you might want to consider Bronco Drilling ( BRNC). This company provides contract land drilling and workover services to oil and natural gas exploration and production companies throughout the U.S. One of the savviest investors in the world and the richest man in the world, Carlos Slim, owns around 15% of the company. Plus, the stock is so beaten down that it trades just 40 cents off its 52-week low of $3.25 a share.

If good things come Bronco's way, a major short squeeze could be in the cards since the share float stands at 22 million and the short percent of that float is 9%.

Other small-cap names that look interesting include helicopter transportation services provider to the Gulf of Mexico PHI ( PHI) and Allis-Chalmers Energy ( ALY), which provides oil services and equipment to companies offshore in the Gulf of Mexico and globally in Argentina, Brazil, Bolivia and Mexico.

Investors could also play the space through the Oil Service HOLDRs Trust ETF ( OIH), which invests in a basket of oil-related companies that operate in the drilling, well-site management, and related products and services for the oil service industry. Playing the space with this ETF will allow you to spread your risk among a number of companies instead of just taking a single stock position. The top holdings in the OIH include Halliburton ( HAL) at 11% of assets, National Oilwell Varco ( NOV) at 7% of assets and Schlumberger ( SLB) at 11% of assets.

It's worth noting that the OIH is starting to move back above its 50-day moving average of $102.28, which is considered bullish among technical-based traders.

To see more oil-related stock picks, such as Hercules Offshore ( HERO) and RPC ( RPC), check out the Top Oil-Related Stock Plays portfolio on Stockpickr.

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