The Best Ancillary Oil Plays

 | Jul 01, 2014 | 6:28 AM EDT
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When I first got into journalism we were being schooled by Woodward & Bernstein to follow the money. It was always the money trail that got you to what was really happening. 

In the stock market you can do the exact same thing when you look at the money.

Right now I am following the money in oil and gas, and it keeps leading me to the places that make the most sense to invest. Just take last night's Mad Money.

Ostensibly, I had no oil companies on last night. That's pretty unusual, as I have tried to introduce people to all the best oil and oil-related plays I can find, from Cheniere Energy (LNG) to Access Midstream Partners (ACMP) to Halliburton (HAL) to Anadarko (APC), Apache (APA), Carrizo (CRZO), EOG Resources (EOG) and so many others.

The performance of all of these companies continues to astound, as we saw yesterday when Cheniere signed a startlingly exciting 20-year agreement with Woodside Petroleum from Australia. This was a total shocker; Woodside is supposed to be the king of LNG and here it is, buying from little Cheniere.

Last night, however, I featured three odd beneficiaries of the oil and gas renaissance simply because I followed the money.

First, the one most abundant material on earth may be sand. Silica is widely hailed as a material that has almost no cost.

Which is why it is amazing to listen to the story of Emerge Energy (EMES), a company that makes the right kind of sand for fracking. Believe me, there is only one kind of sand that the oil drilling companies want: the Wisconsin sand that Emerge owns. Now, the first reaction you will have to Emerge is: "don't be ridiculous, there is nothing proprietary about sand." Then you look at the stock price, which has gone from $20 to $105 in a year, and you start to think differently. Then you dig deeper and you see a company that simply cannot keep up with the demand. I am confident this company will top estimates next year simply because it can write its own ticket.

Have we missed it? It's pretty much like EOG or Continental (CLR) or Pioneer (PES); we missed a lot, but there's probably more.

Then there's Timken Steel, the spinoff of Timken that starts trading regular way today. Timken makes the highest quality, strongest steel, the type of mission-critical steel that is used in ball bearings, the parent that Timken Steel's being spun out of. You know what's this company's biggest market? At one time it would have been automotive or mining. But now it is the mainstay of drilling and one of its chief customers is National Oilwell Varco (NOV). You want to drill miles deep? You want nothing to break? You use Timken Steel. It's the default name to go to. The spinoff has a terrific balance sheet, a building order book, and, amazingly, didn't lose money when it was at 50% of capacity a few years back. Who knows how much it will make now that the drilling revolution just keeps getting stronger and stronger.

Finally, there is Sonic (SONC). Okay, I hear you, come on Cramer, it's a restaurant chain. But where it is PREDOMINANTLY a restaurant chain? How about Texas and Oklahoma, two growth states in a little-to-no growth economy. Is that why it had 5% comparable store sales, much more than Wendy's (WEN), Burger King (BKW) and McDonald's (MCD) combined?


But it sure is a tailwind that Sonic's got a proportionally huge business in those two oil and gas booming states.

It's been six years now that I have been singing this oil tune and still most people haven't caught on to it. Now I am humming the ancillary plays and I have to tell you, they are every bit as in the money.

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