National Oilwell Varco (NOV) provides equipment and services for oil and gas exploration and production. This company is among the best stocks in a fundamentally sound industry.

The reason I like this industry because it provides some exposure to rising energy prices while it is not as sensitive to changes in energy prices as production and exploration companies are. This is because of its relationship to the oil production industry. I like to compare this industry to merchants who sold goods to gold miners during the gold rush in the mid-1800s. During the gold rush, merchants who sold food and equipment to miners made a steadier and surer profit than miners. Rather than being directly linked to the profits of a few mines, the merchant's profits were linked to the profits of their customers. This is a lot like what National Oilwell Varco does. It doesn't produce oil and gas, it sells equipment and services to companies who do the drilling and producing. If one of its clients goes bankrupt, National Oilwell Varco will not necessarily go bankrupt; it still has several other clients. This is not saying energy services companies are immune to the fluctuations in energy prices. They are still linked to the production and exploration of energy.

So why did I pick National Oilwell Varco over other equipment and services companies? It's fundamentals are stronger than those of its competitors. Specifically, my stock ranking system gives it a good rank. It has a score of 84.83, good enough to place it in the top 1% of stocks ranked by my system.

To sum it up, National Oilwell Varco is in the right industry and has strong fundamentals. This generally leads to shares outperforming the overall market by a wide margin.

Disclosure: No position in National Oilwell Varco