C&J Energy Services Inc (CJES): How To Play Fracking

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While fracking has momentum, it’s also true that tighter controls of its environmental impact are coming, too. Heckmann Corporation (NYSE:HEK) is in the right place for this: it treats and disposes of wastewater that fracking produces.

The company is about the same size as C&J Energy Services Inc (NYSE:CJES), but Heckmann’s sales growth exceeded 100% every quarter for the last two years. Earnings, however, are harder to come by due to heavy capital spending, especially on acquisitions. In 2012, it got out of the red and eked out a small $2.5 million net income. Analysts project they will make 19 cents a share next year, and at a recent $4.10 gives them a forward P/E of 21.

Heckmann Corporation (NYSE:HEK) will be more volatile, but with management owning 10% of the shares you at least have a dedicated force running the company. The stock has traded as high at $10 and as low as $2 per share since 2008 when it became public.

If these two fracking-centric companies seem too speculative for your tastes, consider Market Vectors Unconventional Oil & Gas. This new ETF only went public last year, and focuses on companies that exploit tight formation of natural gas and oil.

Three quarters of the ETF’s positions are in the U.S., and the balance is in Canada. Over 85% of the companies are large cap, providing some stability to the portfolio. But the fund is volatile. At its March 2012 IPO, it was $25, then fell to $19 and trades today at $25 again.

Long term, shale resources will be thoroughly developed. The fracking technology is here to stay.

The article How to Ride the Fracking Boom originally appeared on Fool.com and is written by Steve Peasley.

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