...just added final block of shares at todays blue-light special, we shall see.
This was a good article and should be remembered on dips
The Hot List is attracted not to big integrated oil outfits like ExxonMobil ( XOM - news - people ) and BP ( BP - news - people ), but on more specialized energy companies. The five petroleum-related companies in the portfolio are for the most part oil and gas services firms, making equipment or providing services for the bigger integrated companies. These services companies were pummeled after oil dropped from its $147 high in 2008, enduring far more damage in terms of market value than integrated oil and gas stocks. With crude oil prices back on an upward ascent since early this year, the oil services stocks have sailed higher too. A number of them remain significantly undervalued, according to my models. Here's a look at the five petro plays.
National-Oilwell Varco ( NOV - news - people ): Based in Houston, Varco designs, manufactures and sells equipment, components and services used in oil and gas drilling and production. Its products include major mechanical components for land and offshore drilling rigs; complete land drilling and well servicing rigs; extensive lifting and handling equipment; and drilling motors, bits and tools. Varco has a market cap of about $17 billion, and has raked in more than $13 billion in sales in the past 12 months.
The strategy I base on the writings of Benjamin Graham is quite high on Varco. Graham, known as the "Father of Value Investing," was a very conservative investor who dug deep into a company's balance sheet. The model I base on his writings likes that Varco's current ratio (current assets/current liabilities) of 2.1 is greater than 2, a sign of good liquidity, and that its net current assets ($5.4 billion) are far greater than its long-term debt ($875 million), a sign that it is on strong financial footing. As a value investor, Graham also made sure he was buying good stocks on the cheap. The model I base on his writings looks for stocks with price/earnings ratios no greater than 15, and it also makes sure the product of a firm's P/E and price/book ratios is no greater than 22. With a P/E of 11.6 and a P/B of 1.21, Varco looks like a bargain.
I think NOV and FLR are sort of in the same boat. Great value but earnings trend worries. I think NOV will execute, but I would have liked them to use the cash for acquistions instead of giving it to the shareholders. NOV is one of my favourite stocks because the company is built like a brick sh!t house and it has good options activity. TTES is a good stock too but it's hard to say what it's worth with the market maker in control of that stock.