David Dreman: Battered Investor Syndrome

Jul 09, 2010

Investors have taken a psychological beating. Their portfolios and their confidence have been eaten away. It's a good time to buy.

The Dow Jones Industrial Average just had its worst May since 1940. Europe is reeling--its economies, its stock markets, its politics. Why all the pessimism? Are we having some kind of 70-year flashback? It's as if people were having nightmares of hobnailed Nazi boots filling the streets.

The [b]iShares Dow Jones U.S. Oil & Gas Exploration & Production Index Fund ( IEO - news - people ) ([/b]IEO, 51) is an ETF that aims to track the Dow Jones U.S. oil and gas exploration index. The ETF is down 14% from its 12-month high. The portfolio includes Occidental Petroleum ( OXY - news - people ) (14%), Apache ( APA - news - people ) (7%), Devon Energy ( DVN - news - people ) (7%), EOG Resources (7%) and XTO Energy (6%). Buy the ETF now, while it is distressed.

Oil Services Holders Trust (OIH, 99) is an ETF that has been even harder hit than IEO. The stock is down 27% from its late-April high. Its largest holdings are Baker Hughes ( BHI - news - people ) (14%), Schlumberger ( SLB - news - people ) (13%), Transocean ( RIG - news - people ) (12%), Halliburton ( HAL - news - people ) (11%) and Diamond Offshore Drilling ( DO - news - people ) (7%). It is a good bet for anyone who doesn't believe offshore drilling will be banned indefinitely in the U.S. and globally.

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