Q: One group you and your colleagues do like is the integrated oil companies. Why? A: Right now, the market seems to be very pessimistic on the integrated oils. I think the market is worried that there may be windfall-profit taxes. The market has also taken the view that if you're bullish on oil, you're better off owning E&P [exploration and production] companies or oil-services companies. And, again, the market has generally factored in lower oil prices than we think are likely. All this makes the major oils look very inexpensive. As of last week, the major oils, including ExxonMobil [ticker: XOM], ConocoPhillips [COP] and Chevron [CVX] were trading at about eight times earnings, based on oil prices of $110 a barrel. They were trading at four times enterprise value [stock-market value plus net debt] to Ebitda [earnings before interest, taxes, depreciation and amortization]. That's fairly inexpensive by historical measures.

Q: Do any of these companies stand out? A: ConocoPhillips is our overall top pick among the major oils, partly because they have more oil in OECD countries. The tax rates tend to be a little bit lower in those countries than they are in some of the non-OECD countries. They've also got a large natural-gas position, which they got when they acquired Burlington Resources several years ago. In the two years after they bought it, natural-gas prices fell. So the market has taken a pessimistic view of the Burlington Resources acquisition. But now, with natural-gas prices rebounding to around $12 per million BTUs, those assets should be performing a lot better.

Q: One group you and your colleagues do like is the integrated oil companies. Why? A: Right now, the market seems to be very pessimistic on the integrated oils. I think the market is worried that there may be windfall-profit taxes. The market has also taken the view that if you're bullish on oil, you're better off owning E&P [exploration and production] companies or oil-services companies. And, again, the market has generally factored in lower oil prices than we think are likely. All this makes the major oils look very inexpensive. As of last week, the major oils, including ExxonMobil [ticker: XOM], ConocoPhillips [COP] and Chevron [CVX] were trading at about eight times earnings, based on oil prices of $110 a barrel. They were trading at four times enterprise value [stock-market value plus net debt] to Ebitda [earnings before interest, taxes, depreciation and amortization]. That's fairly inexpensive by historical measures.

Q: Another sector you favor is exploration and production. A: Our top pick is Cabot Oil & Gas [COG], one of the smaller companies, with a market capitalization of about $6 billion.

Q: Another sector you favor is exploration and production. A: Another company in this group that we like is Apache [APA], which is larger, with a market capitalization of about $45 billion. They have a nice balance between crude and natural gas and domestic and international exposure. We think international natural-gas prices are likely to start rallying, and Apache has got a good position in Egypt and Australia. And they have a number of key assets domestically.

Q: What other sectors look attractive? A: Pipelines. The pipeline companies don't directly benefit from higher commodity prices, as would integrated oil or E&P companies, but there is a great need to expand our pipeline infrastructure in this country, and a lot of the companies we favor are positioned to do just that. Oneok [OKE] and El Paso [EP] are two we like. El Paso has a very large natural-gas pipeline network, and it looks undervalued to us. As for Oneok, they are well-positioned to benefit from a lot of natural gas in the Rockies and some of these mid-continent shale plays.

Q: What other sectors look attractive? A: Pipelines. The pipeline companies don't directly benefit from higher commodity prices, as would integrated oil or E&P companies, but there is a great need to expand our pipeline infrastructure in this country, and a lot of the companies we favor are positioned to do just that. Oneok [OKE] and El Paso [EP] are two we like. El Paso has a very large natural-gas pipeline network, and it looks undervalued to us. As for Oneok, they are well-positioned to benefit from a lot of natural gas in the Rockies and some of these mid-continent shale plays.