Oil Service ETFs Could Offer Long-Term Value

ETF Trends reported that while oil services-related exchange-traded funds were hit hard by the major fall in energy prices, the pullback offers a potential value play for risk-tolerant investors.

As quoted in the market news:

For instance, the Market Vectors Oil Service ETF (NYSEARCA:OIH) has declined 21.8% over the past year. Consequently, OIH is currently trading at an 18% discount, according to Morningstar analyst John Gabriel.

The oil services ETF shows a price-to-earnings of 12.6, compared to the 17.3 P/E of the SPDR S&P 500 ETF (NYSEARCA:SPY).

Morningstar analyst John Gabriel stated:

The investment thesis for taking a stake in OIH is likely motivated by the fact that the incremental barrel of oil being produced is increasingly coming from areas (deep water, oil shale, the Arctic) that demand more services expertise and technology. Such a dynamic supports healthy long-term industry trends and pricing power. However, prospective investors should also keep in mind that oil-services firms do tend to move in a somewhat outsized fashion depending on which way the economic winds are blowing.

Click here to read the full ETF Trends article.