Key Player
It would seem intuitive that a great way to play oil would be to focus on businesses that cater to the needs of oil companies. Such companies should actually experience a pick up in demand now that the price of oil has stabilized somewhat and the global economy is no longer in a free fall. One of the best in the space is Lufkin Industries (Nasdaq: LUFK), a supplier and installer of oil field pumping equipment. Lufkin's products help oil companies increase efficiency. Lufkin's technology helps aging oil wells remain operative for longer than they otherwise would. The company also makes and services gearboxes for industrial applications.

The company operates all over the world and has been in business since 1902. The company is debt free, and sells for $45 a share or 10.5 times earnings. When the market was enamored with oil, Lufkin shares fetched nearly twice as much as today's current price. It's likely Mr. Market will once again be enamored of this stock.

At $700 million, the company's market cap is about 10 times the free cash flow earned in 2007. Free cash flow for 2008 was substantially less at $18 million, but the company's free cash flow in the 2009 first quarter came in at $35 million. Don't expect 2007 numbers in 2009, but 2010 could be a great year for Lufkin as the company's business gains ground.

Bottom Line
Lufkin benefits from the passage of time as oil wells continue to age. Shares are neither cheap nor expensive, but the world's aging oil infrastructure bodes very well for the future of this company. (For more, check out The Industry Handbook