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I have experienced many bottoms in the oil service sector. A couple have felt like, and probably were, "bull traps" (which some people inexplicably call "bear traps"--odd since the buyers, the bulls, are the ones who get caught). Oil prices are up from their lows, a cold winter is in the offing, OPEC seems to be getting their strategy together. All good signs for the price of oil, and hence, the earnings of the drillers and the service companies. TDW's P/E is hovering in the low 4's, another good sign that the industry will be hard pressed to disappoint.

What's missing? Asian demand, which would slurp up excess oil like a 12 year old working on a malted milk shake. Is Asia recovering? Maybe not yet, but it's hard to count them out for the indefinite future. Sooner or later their oil supply will be completely depleted and they will have to buy more oil. Other worries? The general condition of the world economy, the aging bull market and nervous capital.

Still, if you were going to place a bet, er, make an investment at this moment, with a 6 to 18 month horizon, battered oil would seem a good one.

Having said that, there may be other companies in this sector which will outperform TDW. In part this depends on the depths to which they have fallen because of their sector(see UTI, PTEN and GW, land drillers) and in part on the reverse magic of leverage in a recovering sector (see TMAR, HMAR)--just as leverage will drive down equity very fast in a falling market, it should drive it up very fast in a rising market.
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