Energy Gems on the Gulf Coast

Despite—or because of—BP, these four energy “stocks under rocks” look like diamonds in the rough.

The BP oil spill, the deep-drilling moratorium, the toll on fishing and tourism, and a reputation as an economic backwater would seem to discourage serious investors from looking for local stocks native to Gulf of Mexico’s coastal region. But amid the bleak environment lurks opportunity, says a diehard booster of and expert on the regional economy.

That would be Peter Ricchiuti, a finance professor at Tulane University, in New Orleans, who specializes in analyzing small and midsize companies headquartered in the Gulf states. He calls these firms, rarely followed much by brokerage-firm analysts or mutual fund managers even in the good old days of Wall Street, “stocks under rocks,” and he’s used them as a teaching tool for 17 years. Each year Ricchiuti picks 40 companies, many in the energy field but also in regional standbys, such as agribusiness and retail, and assigns students in groups of four or five to research them thoroughly. The analysts-in-training meet the managements, analyze the industries and conservatively estimate the businesses’ intrinsic value. Their findings, called Burkenroad Reports, are available free at www.burkenroad.org. Below are four current picks from the energy sector. (For a glimpse back at some old picks, see Gulf Coast Stocks Hold Strong.) All share prices are as of the July 20 close.

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Contributing Editor, Kiplinger's Personal Finance