Published: November 8, 2010

You've probably heard that old piece of investing advice to "Buy when there's blood in the streets." Basically, it means that there's a geographical area, business sector or line of business that has fallen seriously out of favor. Thus, there are screaming bargains available, if you have the guts to step up and assume the risk.

Run, and Don't Look Back?
Still, that "blood in the streets" line is intimidating. There's blood in the streets because something really bad is happening. People are dumping their shares. They want out. They're running away and not looking back.

Often as not, people make tracks for a darned good reason. There might be a war or revolution in some area. That could lead to seizure or destruction of assets, and massive investment losses. Think of Iran in the late 1970s, or Venezuela more recently.

Then there are business sectors that crater, such as we saw with the asbestos business about 20 years ago. The class action lawsuits hit so fast and furious that many old names, like Johns Manville, were belly up before you could blink an eye.

Sometimes there are terrible events that just wreck a company's stock. A few months back, for example, Toyota cracked up. This iconic Japanese firm got hit by a rash of news reports of unsafe vehicles, with bizarre acceleration problems and bad brakes. The lawsuits went national, indeed viral. Within days, Toyota went from one of the most admired companies in the world to being the butt of jokes from late night comedians like Jay Leno.

Or look at BP (NYSE: BP) - also known as "British Petroleum," when U.S. politicians speak its name. BP blew out a deep-water oil well in the Gulf of Mexico, and even two months later is unable to control the well or clean up the oil slick. BP stock crashed, and now it's turning into an ATM for damage claims. As you surely know, BP even had President Obama ripping into it, in a speech from the Oval Office. How much worse can the bad publicity get?

Opportunity Inside Misfortune?
In this article, I'm not going to dwell on foreign revolutions, or how an industrial product has fallen out of favor, or how BP is a reviled name anymore. Instead, I want to talk about an opportunity that's yet to be exposed to Wall Street... A more tangential play on a big news item.

Where am I going with this? Is there blood on some street somewhere? Not exactly. It's more like there's oil on the water - BP's oil. And we have a chance to profit from it. Just so you understand, I'm truly sorry about the Gulf of Mexico oil disaster. But it's giving us a chance to profit.

Yes, fate has offered us an offshore energy opportunity. Of course, BP has made a mess of its deep-water well. In turn, President Obama has banned new deep-water drilling in the Gulf of Mexico for six months (yeah, right, try indefinitely). Plus, we'll surely see tighter regulations over drilling in shallow waters.

Point is the Gulf of Mexico has now picked up the reputation as a problematic locale for future offshore energy development.

So what are we going to do?

We're going to invest in beaten down natural gas drillers in the SHALLOW waters of the Gulf of Mexico. The shallow water drilling will come back soon, I believe, and it offers some incredible investment potential.

You see, shallow drilling offers a big distinction from deep-water drillers (in regulators' eyes, at least) without much difference in their core business. You see, some of those shallow water drillers actually drill very deep. Right now, I think there's significant upside in a handful of shallow water plays that saw their own share prices impacted by the fallout from BP.

While Byron has already recommended his best shallow oil recommendation to his Energy & Scarcity Investor readers, this niche play could still provide significant upside for a handful of ETFs like the SPDR S&P Oil & Gas Equipment & Serices Fund (NYSE: XES) and the PowerShares Dynamic Oil Services Fund (NYSE: PJX).

-- Byron King
Contributing Writer
Penny Sleuth

Sponsored Link: Free access to this Secret $200 Retirement Blueprint. Last year $200 could have turned into $10.1 million following 5 simple steps revealed in this secretive retirement blueprint. It's happened before, but could it happen again and to you? Click here to watch the presentation now.

Note: This article originally appeared on Penny Sleuth