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Is Schlumberger (SLB) A Smart Long-Term Buy?

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Harding Loevner, an investment management firm, published its “World Equity Fund” second-quarter 2021 investor letter – a copy of which can be downloaded here. A return of 2.73% was recorded by the fund for the Q2 of 2021, below the 5.04% return of the MSCI World Index, and the 4.68% return of the MSCI All Country World Index for the same period. You can take a look at the fund’s top 5 holdings to have an idea about their top bets for 2021.

In the Q2 2021 investor letter of Harding Loevner, the fund mentioned Schlumberger Limited (NYSE: SLB) and discussed its stance on the firm. Schlumberger Limited is a Houston, Texas-based oilfield services company with a $42.4 billion market capitalization. SLB delivered a 39.07% return since the beginning of the year, while its 12-month returns are up by 94.99%. The stock closed at $30.36 per share on October 1, 2021.

Here is what Harding Loevner has to say about Schlumberger Limited in its Q2 2021 investor letter:

"In Energy, another sector whose growth bona fides are often suspect, we bought two new holdings (which includes) Schlumberger, the largest global oil service company. We owned Schlumberger until early last year when we sold it after the sharp drop in oil prices. At the time, we felt that our remaining energy holding, ExxonMobil, with its stronger balance sheet, was in a better position to ride out the cyclical slump in oil demand and even perhaps take advantage of it by investing counter-cyclically... We sold our ExxonMobil holdings and reinvested the proceeds in Schlumberger, whose management, in contrast, has continually invested, through good times and bad, to extend its technological lead in oil servicing. Its latest moves include improving its data analytics platform to enable customers to leverage their data for greater efficiencies and embarking on new clean energy ventures."

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Copyright: Elnur / 123RF Stock Photo

Based on our calculations, Schlumberger Limited (NYSE: SLB) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. SLB was in 41 hedge fund portfolios at the end of the first half of 2021, compared to 50 funds in the previous quarter. Schlumberger Limited (NYSE: SLB) delivered a -7.41% return in the past 3 months.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, artificial intelligence is one of the fastest-growing industries right now, so we are checking out stock pitches like this emerging AI stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage.

Disclosure: None. This article is originally published at Insider Monkey.