US GDP growth is surging to a 40-year high of 6.5%, and economists estimate the rate could double by June before settling in the mid-single digits through next year. This is wonderful news and explains why commodities like copper, oil, and lumber are rising significantly. Curiously, oil stocks have only just begun to re-inflate.

I want to add an oil field services company to the portfolio — and it’s leveraged for higher oil demand without being exposed to the risk of exploration. The one I have in mind ranks #1 in North America, and it’s as much about technology as it about oil. I like that combination, especially now.

Halliburton Co. (HAL) is the largest oil field services company in North America, providing investors significant leverage for normalized oil demand associated with the economic rebound. While US consumption is still 2 million barrels per day below pre-COVID-19 levels, recent inventory drawdowns suggest producers will need to find new sources of supply, and this is very good news for Halliburton.

Exploration companies rely on Halliburton’s technical expertise and specialized equipment to bring hydrocarbons to the surface. The company does not bear the risks associated with exploring for oil and gas, but instead collects considerable fees as an embedded services provider — another positive for investors.

The stock has rebounded from earlier lows, but it still trades at around a 65% discount to it’s pre-COVID-19 high. I believe this gap will narrow as oil demand rises, reflecting a potential doubling of current earnings estimates into 2022.

Halliburton’s impressive Q1 earnings beat estimates for a thirteenth consecutive quarter, and CEO Miller expressed “confidence” in the results as a harbinger of additional upside ahead. The company managed to make money even during last year’s virtual cessation of new drilling, and sequential growth is anticipated over the next several quarters.

On a year-over year basis, Halliburton is guiding analysts to 50% EPS growth annually through at least next year. By 2023, Halliburton is expected to approach its pre-COVID-19 earnings high of $1.90/share, implying a forward P/E ratio of 11.4x — well below its pre-COVID-19 average of 22x.

I like owning HAL at the $20-23 range, which coincides with the 50-day moving average and the lower range of a clear upward channel (chart below).

My target of $38 comes from multiplying 2023 consensus estimates of $1.80 by a P/E multiple of 22x (Halliburton’s median valuation pre-COVID-19 in 2018-19), discounted to the present at 2% ($1.80 x 22) * 0.97 = $38.

Current skepticism could become a catalyst for the stock in coming months. As analysts raise estimates and targets, institutional investors will buy. This may take a while, but I believe HAL will trade appreciably higher as oil demand returns and Wall Street plays catch-up.