With natural gas plummeting to an all-time low in the summer of 2012 and crude contained by slow economic growth, energy stocks have been big underperformers. That shows up in the sector's 3% gain in the past five years, 12% gain in the past three and just 7% gain in 2013 against the S&P 500's 20%.
One of my favorite ways to cash in on the energy trade is with offshore drillers. I'm bullish on the offshore drilling industry because that's where most of the new oil is being found. In the past decade, more than 40% of all newly discovered oil was found in ultra-deep water, bypassing both onshore and near-shore discoveries. Big finds in the Gulf of Mexico and off the coasts of Brazil and Africa will also continue to drive demand for offshore drilling services.
There are plenty of great offshore drillers to choose from, including Transocean (NYSE: RIG), Diamond Offshore Drilling (NYSE: DO) and Noble Energy (NYSE: NBL). But my favorite pick from the group is SeaDrill (Nasdaq: SDRL), one of the largest offshore drillers in the world with a fleet of 66 drill ships and a market cap of $20 billion. With crude surging above $100, Seadrill is up 20% in the past two months. Take a look:
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