“Is Halliburton A Good Stock To Buy?” was written 2 years ago when it was trading at $35. We’d like to hear your thoughts.
Halliburton (HAL) is an oilfield services company. It conducts business in approximately 80 countries in North America, Latin America, Europe, Africa and Asia. Investors who want to protect themselves from the decline in dollar can gain foreign markets exposure buy purchasing HAL stocks. Halliburton has produced a positive trend in earnings per share over the past five quarters and has posted better than expected results. Ken Fisher initiated a brand new $280+ million in HAL during the second quarter. Ken Griffin also had over $100 million invested in the stock. We are going to take a closer look at Halliburton and its comparable companies in the Oil & Gas Equipment & Services industry, including Baker Hughes Incorporated (BHI), Schlumberger Limited (SLB), and National Oilwell Varco (NOV) to determine which stocks promise higher returns for investors.
The company reported revenues of $6.55 billion for the third quarter of 2011. Second quarter operating income rose 43% to $1.2 billion. The company has $1.64 billion in net debt on its balance sheet. Its EPS is $3.04 during the past 12 months. Halliburton is expected to earn $3.35 in 2011 and $4.13 in 2012. The stock recently traded at $35.06. Its current PE ratio is 12.68.
Halliburton’s earnings are expected to grow at 18% over the next five years. This implies that its PE ratio using its 2014 earnings is around 6.10. BHI’s expected growth rate is 23% and its corresponding PE ratio is 6.39. Schlumberger is expected to grow at 22.33% and its PE ratio using its 2014 earnings is around 8.82. NOV is expected to grow by 18% over the next 5 years and its PE ratio using its 2014 earnings is around 8.73. Halliburton looks undervalued compared to other stocks in the group. BHI is also trading at a discount assuming its growth estimate is accurate.
Volatility is generally used as a measure of risk. Halliburton’s beta is 1.64, BHI’s beta is 1.57, Schlumberger’s beta is 1.42 and NOV’ beta is 1.52. Halliburton looks to be the most risky stock in the group. Schlumberger has the lowest risk compared to the comparables but it is still more volatile than the market.
Hedge Fund Ownership:
Stocks that are favored by hedge funds tend to outperform the market by a few percentage points on the average. Schlumberger was the most popular stock among hedge funds at the end of second quarter. It was held by 49 hedge funds. Halliburton was the second popular stock. 42 hedge funds were bullish about it. There are 33 hedge funds bullish about BHI and 31 bullish about NOV. Ken Fisher was bullish about HAL, SLB and NOV.
Stocks purchased by insiders tend to outperform the market on the average. Schlumberger was purchased by one insider during the past six months. Other stocks do not have insider purchases during the same period.
Schlumberger beat other stocks in Volatility, Hedge Fund Ownership and Insider Purchases, but its 2014 PE ratio is unfortunately the highest. On the other hand, Halliburton is the most undervalued stock in the group. Strong hedge fund interests in HAL also indicated some form of perceived value in the stock. We like Halliburton and we strongly urge investors to do an in-depth analysis of the stock for their portfolios.