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Ensco plc Message Board

  • busy26795 busy26795 Jun 1, 2011 7:34 AM Flag

    Crame buying more ESV

    Closing Two, Adding to Three
    Jim Cramer
    05/31/11 - 09:53 AM EDT

    After you receive this Alert, I am going to sell the remaining positions in WellPoint (WLP:NYSE) and Weatherford (WFT:NYSE), as I indicated I would do in the Weekly Roundup -- 700 shares of WLP at $78.39 and 3,600 shares of WFT at $19.91. I am going to add 300 shares to Freeport McMoRan (FCX:NYSE) at $52.37, 500 shares to U.S. Bancorp (USB:NYSE) at $25.64 and 200 to Ensco (ESV:NYSE) at $54.52. I am also looking hard at Baker Hughes (BHI:NYSE) and/or Fluor (FLR:NYSE) to add to my energy portfolio mix.

    I am up 31% in WLP and 10% in WFT (although I had been aggressively buying at the $12-$13 level for a much bigger gain), and I will take these gains so I can continue to build new positions FCX and USB, which I believe have more upside in the near term.

    Freeport is the leading player in copper (and has exposure to gold, albeit to a lesser degree), which continues to see record low inventories and high demand. It has some of the highest-quality deposits in the world and boasts a very strong balance sheet. U.S. Bancorp is a high-quality "plain vanilla" bank with strong fee-based (recurring) revenues and a diversified equity stream. It, too, has a very strong balance sheet with enough capital on hand to meet the very strict Basel III requirements. Both stocks are trading below their long-term averages on a P/E basis as well. Finally, Ensco officially closed the Pride acquisition today and is well on its way to building a giant portfolio in the deepwater market. I expect sizable synergies to be outlined shortly, which will be a positive catalyst for the shares.

    After my trades, I will be out of WLP and WFT, and I'll own 800 shares of FCX, or 1.32% of the portfolio; 1,000 shares of USB, or 0.8%; and 2,300 shares of ESV, or 3.91%.

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    • Ensco (ESV:NYSE; $53.99; 2,100 shares; 3.61%; Sector: Energy): I continued to build this position this week with proceeds from my Weatherford sale. Ensco has good upside, driven from the Pride acquisition, improved backlog and mix and the general recovery in the deep-water drilling business. The Pride deal should close in a matter of days, and since the stock has lagged its peers by 20% year to date (trading at 9.1x earnings and 5.8x EV/EBITDA), I'm a buyer, given the leverage on higher pricing. This remains a great story, given its strong balance sheet, financial flexibility and quality assets around the world. My target is $65.

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