It’s one of the hottest questions on Wall Street, evident by the fact it’s the most widely discussed industry in current brokerage research.

In brief, what do you buy if you believe those torrid energy stocks are due for a rebound? That is a common instinct after their recent skid of between 10% and 25% in the wake of crude oil’s plunge to less than $50 a barrel recently from a peak of $78.40 a barrel last July.

For some thoughts, I rang up a fellow I’ve quoted in the past — the $100 million energy man, as I’ve dubbed him, and one of the best oil minds in the country.

That’s Alan Gaines, who was a crack institutional energy analyst on Wall Street for more than 20 years and who has amassed a personal portfolio of about 20 energy stocks worth more than $100 million.

Mr. Gaines, 51, is currently CEO of Dune Energy, a Houston-based oil and gas producer. During the past three years, energy stocks, reflecting the surging price of oil, have run rings around the general market, averaging annual gains of about 30% to 40%.

In the same period, Mr. Gaines’s portfolio of energy stocks, he tells me, has averaged yearly increases of about 75%. In general, most of his energy stakes are at least sixfigure positions.

First things first. Since the price of oil — currently trading in the mid-$50s — dictates the prices of energy shares, where does oil go from here?

Because of the unknowns, obviously no one can answer that with any degree of certainty. Mr. Gaines’s best guess is oil will wrap up the year at about $70 a barrel. Rising global demand, which has recently been weak, the insatiable oil appetite of China and India, and the inability of most majors to replace existing production pretty much assure the principal direction of oil is up, he says. He also points to the ever present threat of supply disruptions arising from terrorism, war, and turmoil in the OPEC countries, including Saudi Arabia, all of which he describes as “powder kegs.”

Another plus for the energy sector is thought be the likelihood of a continuation, if not acceleration, of the industry’s consolidation trend since, as Mr. Gaines puts it, it’s cheaper to buy reserves on Wall Street than to drill for them.

His uncanny ability to ferret out undervalued energy assets can be seen by the fact that a number of his past energy holdings have been acquired, including Unocal, Vintage Petroleum, and Kerr-McGee.

Mr. Gaines, a longer term investor and a former adviser to Carl Icahn in his hostile takeover attempts of such oil industry bigwigs as Texaco, Marathon Oil, and Phillips Petroleum views oil as one of the safest investments. About the only risk factor he sees is weather related, and that is in the short term.

His favorite energy stocks, seven all told and each of which he owns personally, involve oil and gas exploration and oil services companies.

Call them our energy whiz’s “magnificent seven,” a takeoff on the hit Western film of the same name.

His top pick, Allis Chalmers Energy (trading at about $17.50) — which he thinks can double or triple in the next two or three years — provides oil field services to oil and gas exploration companies. His reasoning for such a gusher: very strong growth prospects, excellent management, and a very astute acquisition program.

Rounding out his seven selections are Comstock Resources, Newfield Exploration, Pogo Producing, ConocoPhillips, Anadarko Petroleum, and Cimerex. With the exception of Pogo, each, he notes, has strong management.

Then why own Pogo? “Because I view it as a takeover or restructuring story,” he says. “Its management is awful, so someone else has to extract the values.”

Mr. Gaines views all seven companies as potential takeover targets. In a takeover, he thinks they could fetch premiums of between 30% and 50% above their current prices.

What happens if there is no takeover? “I’m afraid,” he quips, “you’ll have to suffer with returns of 15% to 25% over the next 12 months, or, if you’re lucky, a lot more.”

dandordan@aol.com