Be fearful when others are greedy and greedy when others are fearful - so goes the advice of investment sage Warren Buffett.

Auckland fund manager Castle Point reckons the Berkshire Hathaway chief executive's mantra could now be applied to Australian mining services stocks, which have taken a hammering thanks to the commodity price slump.

The S&P/ASX 200 resources index has fallen 33 per cent since August last year. But in a research note Castle Point, whose investment team recently returned from a trip to Western Australia, said mining services was one of the few listed sectors where investors should "look to be greedy".

"There is genuine fear," the firm said, noting that the sector appeared to be following a typical capital cycle.


"After a period of boom times and over-investment, companies are now resigned to operating in a smaller market and are downsizing."

Castle Point said there would remain a market for such companies, although it would be smaller than it was a few years ago. The key challenge was picking the survivors.

It said Perth-based MacMahon - which provides mining services on both sides of the Tasman, as well in Asia and Africa - was a good example of opportunities in the sector. Its revenue guidance for the coming year, of between A$280 million ($299 million) and A$350 million, was less than a third of the firm's recent peak.

But the company had downsized and was generating cash. "If the industry stabilises at current levels MacMahon could be worth over three times its current share price."

Australian fund manager Allan Gray is taking a similar approach to oil stocks, which have been beaten down following the oil price collapse.

The Sydney-based firm made some bullish bets on ASX-listed gold stocks Newcrest Mining and Evolution Mining 18 months ago that paid off nicely. Newcrest shares have since doubled in value, while Evolution has seen a three-fold rally in its stock.

Allan Gray managing director Simon Mawhinney told the Australian that oil stocks could be rewarding because oil wasn't as dependent on Chinese demand as other commodities, such as iron ore.

"A lot of things out there resemble where gold was 18 months ago, where you have large parts of the cost curve generating losses. It is generally those industries that present real investment opportunities if investors are happy to look five or so years forward and if they are not obsessed with trying to pick the bottom."