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TWST: Which sectors of the energy industry have reaped the benefits of the more than 40% increase in oil prices over the past year?

Mr. McAtee: I think almost all sectors are clearly better off today than they were a year ago. Certainly the E&P (exploration and production) companies have seen their cash flows improve. But the service companies have also benefited; as the E&P companies get more money, they have more money to spend with the service companies. So I’d say all areas in the energy patch are a lot healthier than they were a year ago.

TWST: What are some of the other stocks that you’d like to recommend? Are there any that might be considered controversial?

Mr. McAtee: That was the next one. I think the most controversial one I have is a company called Maverick Tube (NYSE:MVK).

TWST: Well, it lives up to its name.

Mr. McAtee: Exactly. It’s trading around 14 1/2 today. First of all, Maverick manufactures tubulars that are put in a well, and are called Oil Country Tubular Goods, OCTG for short. One of the competitors has come out and said that their shipments in the December versus September quarter are going to be down 40%. As a result, there’s been a spillover effect of people who don’t believe that Maverick is going to make its December quarter numbers, because its competitor is having some problems. I believe that there are extenuating circumstances that will demonstrate why Maverick will not be subjected to the same 40% decline in shipments, and that in fact their earnings per share will increase around 50% on a sequential basis. What’s interesting about Maverick is, they buy steel from a third party, and based on falling steel prices, if Maverick’s shipments and the price they get for their product are flat from the September to December quarter, their earnings will go from 0.17 to 0.25 a share just from lower steel costs. So it’s almost as if they’ve got a sequential improvement in earnings locked in. Also, the reason I believe they’re not going to be subject to a 40% decline in shipments is that they don’t play the spot market for OCTG as much as their competitor does. They have program sales. And the other thing is they have a larger Canadian exposure, and shipments in Canada should be up sequentially from the September quarter to the December quarter, which would offset any weakness that might or might not occur in the US. Ironically, Maverick has not missed any numbers, but their stock has been beaten up more than that of the competitor that announced the problem. It’s a great opportunity, and unfortunately it’s probably lost over 50% of its value from its peak, whereas the average oil service stock is down 20%. So the stock has substantially underperformed, and it’s easy to get nervous when you see a stock that is getting hit worse than the average, but when investors take the time to do the work, that’s what creates an opportunity.