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U.S. ENERGY STOCKS have soared in recent years and, on the whole, still look cheap. A dollar invested five years ago in the iShares Dow Jones U.S. Energy Sector Index ETF is now worth more than $3, not counting dividends, compared with about $1.30 for a dollar invested in the broad-market iShares Dow Jones U.S. Index ETF. Yet the energy portfolio at the end of June went for 17.3 times earnings, according to iShares, vs. 19.9 times earnings for the broad-market one.

Those numbers, combined with a tendency of energy stock to only loosely track day-to-day movements in the broad market, earned a handful of energy names a spot on a recent screen for safe stocks. But the numbers don't tell the whole story.

The earnings on which those modest P/Es are based are swollen due to high oil and gas prices. A reversion toward historic prices might leave energy stocks suddenly looking expensive. Long-term forecasts for the industry are promising, but becoming less so. The Department of Energy reckons demand for energy will rise 19% between 2006 and 2030. Just last year it put growth at 32%. The adjustment, it says, is attributable to the Energy Independence and Security Act of 2007, with its new standards for renewable fuels, corporate fleets, light-duty trucks, boilers, motors and more.

I've argued in past columns that coal seems a good long-term bet, since plug-in electric vehicles will hit showrooms in two years, starting a shift in fuel consumption from under car hoods to inside power plant furnaces. Half of America's electricity comes from coal. Demand for it is expected to increase 33% by 2030. For oil and gas investors, it's best to diversify among a variety of companies: drillers and field service companies, which will profit if prices stay high; electricity sellers, which might gain if the price of fuel stocks fall; and plant builders, which should prosper regardless.

Consider Bismark, N.D.-based MDU Resources Group, which does all of these things. Just over half of its profits last year came from gas and oil production, mostly in the Rocky Mountains and near the Gulf of Mexico, and from pipeline services to other energy companies. Nearly a quarter of profits came from the company's own electricity and gas utilities and construction services provided to other utilities. The rest came from selling raw stone and contracting services to builders and cities. With home building soft, management has been refocusing this last unit on building wind farms and expanding oil refineries and power plants.

First-quarter earnings per share for MDU jumped 70% on high oil and gas prices and an 8% rise in production. All businesses grew profits except for the rock and contracting unit, which produced a wider loss than a year ago. Management boosted its full-year earnings estimate to a range of $1.85 to $2.10 a share from $1.65 to $1.90. Wall Street analysts anticipate $2.28. Included in the forecast is the company's purchase, announced earlier this month, of Intermountain Gas, a Boise, Idaho, utility, for about $328 million. Analysts say Intermountain has yearly sales of around $180 million.

Don't expect this year's pace of earnings growth to continue. Wall Street is looking for 7% growth next year. Analysts say the company should produce 7% to 10% growth over each of the next several years. But shares, at just 13.5 times forecast 2008 earnings, seem more than adequately discounted to reflect the modest growth expectations, and might prove an outright bargain if high energy prices hold. Also, shareholders get a 1.7% dividend that seems plenty secure. The company has paid dividends for 70 straight years and increased payments the last 17 of them.

Have a look at all eight screen survivors if you like. To run your own search, use SmartMoney's stock screener and the full list of criteria.

Also See:
XM-Sirius Merger a Bust for Shareholders
8 Stocks With Attractive Price/Sales Ratios
8 Small-Cap Stocks With Big Growth Potential

See All the Screen Survivors

Foxhole Screen Survivors
Stock Ticker	Company Name	Industry	Curr. Price ($)	3-Yr. Sales Growth (%)	Beta	Forward P/E (Curr. Yr.)
	Chesapeake Energy	Independent Oil & Gas	48.29	33.41	0.33	11.86
	Covance	Research Services	87.67	12.97	0.19	27.48
	Darling International	Cleaning Products	16.05	28.38	0.40	17.45
	Ensco International	Oil & Gas Drilling/Explor	69.60	32.61	0.58	8.36
	MDU Resources Group	General Building Materials	31.30	13.52	0.66	13.79
	Universal	Tobacco Products, Other	50.33	16.71	0.60	9.59
	Watson Wyatt Worldwide Cl. A	Management Services	57.19	29.71	0.52	15.33
	XTO Energy	Independent Oil & Gas	48.67	26.88	0.51	11.42

Data as of July 28, 2008.

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Foxhole Screen Recipe

Beta below 0.7

Three-year average sales growth greater than 12%

Three-year average earnings growth greater than 12%

Forward P/E below industry median

Proj. EPS Growth this year greater than 12%

Trailing 12-Month sales greater than $300 million