What I Learned This Week

The “great contrarian” Sam Zell is investing in U.S. oilfields. Has the R/S for oil-service stocks stopped falling?

The Oil Services Index (OSX) chart below provides some optimism that the sector’s relative strength versus the S&P 500 might be forming a base. This is the most positive development for a sector which has been a perennial underperformer for most of the past five years. As the natural-resource investment firm, Goehring & Rosencwajg, wrote in its latest client letter: “By any measure, oil and oil-related securities are radically undervalued. Over the last 120 years, we estimate it took 17 barrels of oil on average to buy one unit of the S&P 500. Today it requires over 53 barrels. The only time it has taken more was during the parabolic dot-com blow off – incidentally, an excellent…

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