Oil Spill Play: Newpark Resources (NYSE:NR)

Martin Weiss: Two recent mega-events — the Wall Street collapse in 2008 and the Washington response in 2009 … the debt implosion and then the money printing explosion — are mind-boggling in their dimensions.

Neither you nor I can know with certainty what the future will bring. But at this particular juncture, we don’t have to poke around in hidden crevices of the economy. Nor must we stretch our imagination to conjure this or that scenario. To get a pretty good idea of what’s likely to happen next year, all we have to do is follow the path of natural consequences from these two mega-events. And that’s what we’re going to do right here and now.

I have assembled our Weiss Research team of analysts to lay out for you, step-by-step, what those consequences are likely to be in the coming year — 11 startling forecasts for 2010.

Mike Larson is one of the only analysts in the country who accurately predicted both the real estate bust in 2005 and the recent real estate bottom in 2009. Today, he is not only our resident expert on real estate, but also our chief Fed watcher, interest rate specialist and analyst of the entire financial sector.

Larry Edelson, joining us from Bangkok, Thailand, was among the very first to predict that gold would one day exceed $1,000 per ounce, and now that day has come. But Larry’s gold forecast is just one of many that illustrate a special skill he brings to as a Director of the Foundation for the Study of Cycles: Timing the markets.

Claus Vogt, joining us today from Berlin, is the man I’ve personally selected to make the picks — and give the signals — for one million dollars of my own money, based not only on his own years of trading experience but also on the input from our entire Weiss Research team.

I can think of no better person to help us forecast the direction of the global economy and global stock markets.

I hasten to add that forecasting what we believe is likely to happen in 2010 is strictly the first part of our program today. During the second, equally important, part we will give you actionable guidance — investment ideas you can USE to take advantage of the profit and income opportunities that flow directly from our forecasts. And to bring you the best of the best ideas we can, I have also assembled a panel of our investment specialists in each major arena.

Ron Rowland, our specialist on ETFs … Nilus Mattive, our specialist on dividend stocks … and Bryan Rich, our foreign currency expert.

From Southeast Asia, we have our Asia stock specialist Tony Sagami, who just completed a reconnaissance tour of Indonesia and … from Southern South America; we have Sean Brodrick, reporting on his visits to resource companies in Chile and Argentina.

Plus I have invited a special guest, Monty Agarwal, one of the nation’s leading experts on hedge funds, sovereign wealth funds, and global money flows.

Thanks to their participation in this special summit, you benefit from some of the most timely, in-depth and fascinating research in the world today.

Mike Larson: I happen to think the research effort has paid off very nicely. For example, look at the absolutely huge companies that failed, were bought out or bailed out last year! And look how many of those companies Weiss Research specifically named as candidates for failure well ahead of time:

Two of the nation’s largest brokers, Bear Sterns and Lehman Brothers … the nation’s largest mortgage lenders, Countrywide Financial and Fannie Mae … the nation’s largest savings and loan, Washington Mutual … and the nation’s second largest commercial banks, Citigroup.

And next, look at the utterly massive government reaction to those failures that we have uncovered: Fed Chairman Bernanke has responded with the most rapid acceleration of monetary expansion in U.S. history.

Before the Lehman Brothers collapse last year — it took nearly 14 years for the Federal Reserve to double the cash and reserves at the nation’s banks.

But after the Lehman Brothers collapse, it took Mr. Bernanke’s Fed only 112 days — barely four months — to double the monetary base. In other words, he accelerated the pace of bank reserve expansion by a factor of forty-five to one.

Meanwhile, Treasury Secretary Geithner and his predecessor responded with the largest bailouts of all time, helping to triple the size of an already-bulging federal deficit.

The energy sector is facing some challenges. The British Petroleum (BP) oil spill in the Gulf of Mexico has blackened a few eyes on both sides of the Atlantic, but the energy sector is still loaded with profit potential for the astute investor. We recently highlighted one name that can deliver tidy returns to investors regardless of oil’s volatile price swings with Kinder Morgan (KMP). Now, we think it might be a good idea to look for stocks with less involvement in offshore drilling.

One such stock is Newpark Resources (NYSE:NR), a Texas-based provider of drilling fluids, temporary worksites and access roads for oil and gas drillers. Yes, Newpark has some exposure to the offshore business, but the company is more of an onshore drilling play. They specialize in land-based construction as well as environmental and support services. That’s an important distinction when the future of new U.S. offshore drilling activity is murky at best.

Some investors may take a pass on Newpark shares because of the sub-$10 share price. That could prove to be a mistake. Yes, many mutual fund managers don’t invest in stocks priced under $10, but many don’t outperform their benchmarks, either. There are plenty of hidden gems trading for less than $10, and Newpark Resources might just be one of them.

Earlier this month, the company reported first-quarter earnings of $7.8 million, or nine cents a share, compared with about break-even a year earlier. More importantly, the top-line growth was impressive. Revenue surged to $160.8 million from $126.9 million. According to Zacks Investment Research, it was the third straight quarter Newpark has beaten the Zacks estimate by more than 100% and the fourth consecutive time the company reported better-than-expected results.

Sell-side analysts have taken note of Newpark, too. Wunderlich Securities boosted its price target on Newpark to $12 from $8 earlier this month, citing strength in Newpark’s core fluids and environmental services businesses. That’s more than 50% above where the stock currently trades. Newpark shares have rallied about 70% in the past three months, sharply outperforming larger oil services names and the broader market.

Even with this exceptional momentum, it’s hard to call Newpark an “expensive” stock. The shares trade for less than 16 times estimated 2011 earnings and less than two times book value. Those valuations compare favorably with larger, riskier oil services stocks. Given Newpark’s very reasonable valuation, the shares could offer a sanctuary to wary energy sector investors. To go with an onshore oil services play when the political winds for energy are shifting inland, go with NR.

Brandon Clay
Invest With An Edge

Disclosure covering writer, editor, publisher, and affiliates: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

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