Oil Services Stocks Look Like the Place to Be :HAL, SLB, WFT, BHI, SPN, COP, CPX, SHI, CLR, EOG, NOV, LUFK

When is oil going to crash already? Isn't that the most salient question out there? Aren't oil stocks saying that it has to crash and that these levels, whether it be West Texas or Brent, are just absurd?

The valuations for these stocks, whether they be the drillers, the integrateds or the independents, show that there is going to be a collapse in oil that will be of cataclysmic proportions.

Oil services stock valuations are the most out of whack of any sector headed into earnings season.

You have oil companies like ConocoPhillips(COP) yielding 4% despite the breakup impetus. You have oil-service companies like Halliburton(HAL), which has a shortage of employees compared with the amount of business it has, trading where it was when oil was in free fall going to the $30s in 2008.

You have companies like the newly public Complete Production Services(CPX) throwing in the towel and surrendering to Superior Energy Services(SPN), which vows to join the large servicing companies such as Schlumberger(SLB), Halliburton, Baker Hughes(BHI) and Weatherford International(WFT). And you have companies like Daylight Energy, a high-quality Canadian play, succumbing to a $2 billion deal from Chinese oil giant Sinopec(SHI).

We are at a really odd juncture where Brent, the real benchmark for oil, has held up better than every commodity in the world, but the companies that own that commodity and merchandise it are trading as if that benchmark is false.

The problem with the market's judgment is simple: The recession in Europe has to be so, so serious as to disrupt the demand everywhere else in the world. But why would that be the case? Why isn't anyone asking that? Why do we accept the market's judgment and not the judgment of the commodity?

To me, this group has gone from conceivably overvalued unless Brent is going to $120 to way undervalued if oil even goes down another $10. What looks good? How about Continental Resources(CLR), off 11% despite what could be an extremely robust quarter? How about EOG Resources(EOG), down 14% to $77 after having traded at $120?

Or the drilling services companies: Schlumberger down 21% and off from $95 to $65. Halliburton seems particularly cheap, down 13% and $22 from its high, despite a recent check on the business that indicates no slowdown.

And talk about fighting the last war. National Oilwell Varco(NOV) has been sliding for months, and the hedge funds have been shorting and selling pretty much all the way down, as that was the driller that got crushed the most in 2008. This isn't 2008. The stock should be bought.

Yes, Lufkin(LUFK) blew up last week, and takeover target Complete was about to report a shortfall. Both companies attributed their earnings misses to one-time factors. Lufkin has become what I hate to call a serial disappointer, because the previous quarter, too, had a "one-time" problem, but the issues at Complete seem reasonable, including a shortage of parts and some flooding.

Unless oil collapses between now and earnings season, this is the group that seems most out of whack with the fundamentals. It's not making sense unless Brent goes to $85-$90. I just don't think that's possible if it hasn't gone there by this point. Without a double-dip recession worldwide, these stocks seem like the place to be for the coming earnings season.