Halliburton
Market cap: $30.1 billion
2011 revenue: $25 billion
P/E ratio: 8
Dividend yield: 1.1%
Ticker: HAL

Halliburton is a leading oilfield services company, which means it helps oil companies explore, drill wells, and keep oil and gas flowing. But a better way to think of this stock is a diversified way to invest in the shale gas and oil phenomenon transforming the North American energy landscape. It's akin to buying Monsanto circa 2007, when accelerating food and biofuel demand went mainstream. Back then Monsanto traded at a 30 P/E, whereas Halliburton can be had for 8 -- 50% below its five-year average. "There's tremendous upside," says Andrew Lees, manager of the Invesco Energy fund, which owns 2.1 million shares of Halliburton. "I can easily see a 12-month price target in the $55 to $70 range."

Halliburton pioneered horizontal drilling and hydraulic fracturing, techniques that have allowed U.S. shale gas production to increase from 500 billion cubic feet in 2004 to 4.5 trillion today. With the U.S. Energy Information Administration expecting shale gas production to triple by 2035, the company is poised to keep benefiting. Yes, environmentalists worry that fracking chemicals contaminate the water supply, but those concerns could actually help Halliburton gain market share: The company is testing a proprietary fracking-fluid alternative made from food ingredients instead of toxic acids.

Halliburton's shale expertise has international appeal too. Overseas revenue rose 17% in the third quarter, and Lees expects more growth as countries such as China and Argentina seek help developing their own shale plays.

If the global economy dips into recession, energy prices could fall, which would trim Halliburton's projected 2012 earnings growth (analysts' consensus: 22%). But the threat of cheaper crude is already priced into Halliburton stock. And the International Energy Agency is predicting a 1.5% increase in global oil demand in 2012 with no parallel increase in production. Says Lees: "It seems likely that the oil market will be as tight next year as it was in 2008, and the only way to ration oil is with higher prices."


By Jon Birger, contributor @FortuneMagazine - Last updated December 13 2011: 2:08 PM ET
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