With oil prices hovering near $118 a barrel, are energy stocks peaking? Hardly. In fact, the oil sector's price-earnings ratio since the end of 2000 has dropped by 50% despite a 390% leap in earnings, says Morgan Stanley's (MS) Abhijit Chakraborti. Over the same period, the p-e for the S&P 500 (excluding energy) fell just 10%. This indicates the market doesn't believe energy companies can keep up their strong profit growth, Chakraborti says. But it also means, says oil price bull Steve Leeb of Leeb Capital Management, that oil stocks are a bargain. His top choice: Nabors Industries (NBR), the world's largest land oil driller, which operates in North America, Africa, Latin America, and the Middle East. He sees the stock, now at 37.54, at 75 in 18 months. Kevin Pollard of JPMorgan Chase (JPM) also rates it a buy.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

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