Possibility of $80 Oil Makes Only 4 Oil Service Stocks a Buy

A new report from Angie Sedita and the oil services team at UBS points out that an 18% decline in oil prices has resulted in a similar 16% to 21% decline for the large cap diversified oil services stocks. The team also believes the weakness in oil does not quite appear over. They expect pressure on the stocks to continue, perhaps to the end of the year. The good news is they are optimistic that 2015 brings a crude rally, as well as a rally in the stocks.

With all the pressure on the sector, UBS has just four long-term buys that make sense now.

Baker Hughes Inc. (NYSE: BHI) is a leading supplier of oilfield services, products, technology and systems to the worldwide oil and natural gas industry. With more than 59,000 employees working in more than 80 countries, the company helps its customers find, evaluate, drill, produce, transport and process hydrocarbon resources. It remains focused on continuing to see gains in its pressure pumping business, driven by utilization improvements and self-help initiatives.

Baker Hughes investors are paid a 1.1% dividend. The UBS price target for the stock is $83. The Thomson/First Call consensus target is $84.95. The shares closed trading on Wednesday at $61.60.

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Halliburton Co. (NYSE: HAL) flexes its muscle and remains a top stock to buy at UBS. The company now leads peers with North American margins of 18.2%, as well as a plan to increase its allocation for its operations in North America. The other consideration for North American operations is to reduce costs as it becomes increasingly profitable in this region, which is what is helping to drive the strong margin growth.

Investors in Halliburton are paid a 0.9% dividend. The UBS price objective is $80, and the consensus figure is at $82.44. The stock closed at $60.41.

Schlumberger Ltd. (NYSE: SLB) is the largest oilfield services company in the world, with far-reaching operations all around the globe. It is a member of the UBS focus list, and could be poised for years of solid growth, despite the recent turn in oil pricing. UBS and other Wall Street analysts think the company will continue to drive margins on execution, technologies and efficiencies. Russia, Saudi Arabia, Iraq and China are expected to be the strongest markets as geopolitical concerns subside, and that should continue in to next year.

Investors are paid a 1.6% dividend The UBS price target is $135, and the consensus is lower at $131.77. The stock ended Wednesday at $98.44.

Weatherford International Ltd. (NYSE: WFT) has been a frustrating stock for many investors over the years, and it has been hit hard since the beginning of September. The company offers a wide range of global capabilities, including a proprietary system for pressure management in the mushrooming arena of subsea production. The changes in government oil policy in Mexico may provide some favorable tailwinds for the company, especially in 2015.

UBS still likes Weatherford’s long-term prospects and has a $30 price target. The consensus target is $27.15, and Weatherford closed trading Wednesday at $19.

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The time to buy top stocks is when there is panic in the marketplace, and panic is starting to set in. UBS points out in the report that the top names have been hit hard but remain positive on the long-term outlook. The bottom line for investors is that the best bet now is to stay with the big boys.