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A hard hat covered in oil is found in the waters of Chandeleur Sound, La., (Alex Brandon)
A hard hat covered in oil is found in the waters of Chandeleur Sound, La., (Alex Brandon)

TheStreet.com

Oil spill: Four picks that may benefit Add to ...

The massive crude oil spill in the Gulf of Mexico has turned into a nightmare for petroleum giant BP and is an environmental catastrophe.

But it should boost business for companies in the water treatment and environmental services sectors. Here are four investments that should benefit from the efforts to clean up the Gulf oil spill.

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1 - Oil spill recovery specialist Clean Harbors is one company that has seen its shares surge on the spill. The Norwell, Mass.-based environmental services firm works closely with government agencies and is expected to see a long-term revenue boost courtesy of the massive oil spill. CLH was up 5.6 per cent Monday and closed at $66.98.

2 - Water treatment company Nalco Holding Co is another company that should benefit from the cleanup efforts. The company's stock is posting double-digit intraday gains and is flirting with a 52-week high. The Illinois-based company provides dispersants, which break up the crude. Shares closed at $26.19 on Monday, up 5.9 per cent.

3 - A third play on this catastrophe is oilfield-services company Baker Hughes . The Houston firm aids in recovery efforts and gained 1.9 per cent yesterday, closing at $50.72.

4 - Lastly, one can gain diversified exposure to companies in these industries through the Market Vectors Environmental Services ETF, which holds 21 different environmental services companies, including Clean Harbors and Nalco Holding. EVX gained 2.2 per cent yesterday, closing at $46.92.

With nearly 200,000 barrels of crude oil leaking into the Gulf daily, BP is trying to install a shutoff valve on one of three underwater leaks, but this is a complicated operation that may not succeed, further boosting demand for the services of water treatment and environmental companies.

When investing in these companies, it is important to consider the inherent risks that are involved. A good way to protect against these risks is through the implementation of an exit strategy that identifies price points at which an upward trend could come to an end.

According to the latest data at www.SmartStops.net, these price points are: CLH at $64.88; NLC at $24.57; BHI at $47.48; EXV at $44.89. These price points change on a daily basis and are reflective of market volatility and both macro and micro economic factors.

Kevin Grewal serves as the editorial director and research analyst at The ETF Institute and serves as the editorial director at SmartStops.net where he focuses on mitigating risks and implementing exit strategies to preserve equity.

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