Right now, we're in this unique period of fiscal easing and monetary tightening happening at the same time, and we feel that the benefits of tax cuts and infrastructure spending will actually offset the Fed's plans to hike rates.
Since World War II, there have been seven periods like this; the two best-performing sectors under these conditions have been energy and financials.
Schlumberger, one of the top holdings in the energy-tracking XLE, is the largest oil services field play in the world. With a presence in every single energy market in the world, it's definitely a stock that you want to keep your eyes on.
Strong global growth and good supply-and-demand fundamentals have really kept a good, solid floor under oil prices, but the surprising part of the rally in oil prices is that energy stocks have lagged.
In this earnings report, we're really looking to see two things happen.
The energy sector should begin to catch up to the rise in oil prices, and Schlumberger in particular should begin to experience some mean reversion with regard to its stock performance.
The biggest thing to pay attention to is any discussion at all on the impact of rising rig counts. Oil and gas rigs have increased by more than 20 percent year over year, yet Schlumberger has lagged.
Therefore, we see significant upside potential with this stock, to the tune of at least 20 percent, and we think it will get back on the right track.