Trolling for New Ideas, Part 1: HAL

It is a little difficult to find stocks I like at prices currently. In addition, several stocks, such as IMAX and CLB, have appreciated considerably, and I am considering taking part of my position off of the table. 

Thus I have capital, but not enough ideas. While it may be prudent to be patient, I am still going to investigate to see whether there are any speculative or fundamental ideas out there.

The most obvious idea I can see is HAL. The stock is, in my mind, the best of breed in shale fracking. In addition, HAL is one of the few service companies that can make the move to international territories as more countries become interested in exploiting their shale reserves. From this perspective, HAL looks like a better long term play than CJES, though it is not price quite as attractively.

But it is definitely in value territory. After growing 50% yoy, the stock still sits at a P/E of 11? And this is AFTER being cleared of many of the charges related to Macondo. Perhaps civil charges may be raised, perhaps punitive damages may be awarded against them, but will these affect the fundamentals? Not severely.

I would think the indemnification against BP for Halliburton’s pollution would cause perceptions to rise. Yet the stock has remained depressed. Perhaps perceptions are still negative because of the threat of punitive and civil losses…

Yet analysts are overwhelmingly positive on the stock. The low target is above the current price, and Goldman Sachs has named HAL to its conviction buy. The price has been trending up for the past two months, yet it seems to be showing resistance at the mid $37 level. 

So the underlying trend is strong, and perceptions are also strong, yet the price moves are not quite as strong. I would expect the underlying trend and perceptions to reinforce each other and propel the price upwards, but maybe there is something major that I am overlooking. I will have to watch over the next few days and see whether further declines occur. I will try to get shares in the $35 range or below.

 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s