Timothy Lutts, Chief Investment Strategist and Chief Analyst of Cabot Stock of the Month
From Cabot Wealth Advisory 3/21/16 Sign up for Cabot Wealth Advisory—it's free
I’m fairly confident that we’ve seen the low for oil. We’ve had a good rally, and now there’s fundamental evidence to support that rally, as rig counts have been falling rapidly. Plus, I have a hard time imagining that sentiment on oil will get as low as it was late last year, given that production is slowing.
Thus I’m alert to investment opportunities in oil stocks, should any come along that meet Cabot’s criteria.
Trouble is, it’s hard to separate the wheat from the chaff today, given that the group is just crawling out of the basement.
One that’s worth looking at, however, is Schlumberger (SLB), which was recommended by Cabot value analyst Roy Ward in Cabot Benjamin Graham Value Investor.
Schlumberger is a high-quality oil service company that’s been around since 1926. Management has been through plenty of good and bad times. But they’re not just survivors, they’ve actually earned a profit in every year of the past decade!
Last year, revenues at the company fell 27% to $35.7 billion, while earnings fell 40% to $3.37 per share.
But that’s history, and today, as the chart shows, investors are looking forward to better times.
Still, SLB is trading 38% below its highs of August 2014, which means there’s plenty of upside left. Plus, the stock yields 2.7%—and that dividend is solid.
But where do you buy?
As readers of Roy Ward’s advisory know, price matters. In fact, Roy recommends that you never buy a stock unless it’s selling below its Maximum Buy Price. That price, of course, is calculated using 44 separate factors, ranging from earnings estimates to the stock’s beta to its historic P/E ratio to technical strength.
When a stock is selling above Roy’s Maximum Buy Price, it’s a bit too risky to buy. But when a stock is selling below Roy’s Maximum Buy Price, you can invest with the assurance that you’re insulated by a Margin of Error. You know you’re not overpaying for the stock.
So, if you’re interested in SLB, you could just buy the stock here, but the prudent move, if you really want to invest intelligently, is to become a regular reader of Roy’s Cabot Benjamin Graham Value Investor, learn the Maximum Buy Price of Schlumberger and other high-quality stocks, and make a habit of never again overpaying for a stock!
Since inception on 12/31/95, Ray’s Value Model has provided an impressive return of 1,060.9% compared to a return of 531.0% for Warren Buffett’s Berkshire Hathaway! During the same 20-year period, the Dow has gained just 222.8%. For more info, click here. Timothy Lutts, Chief Investment Strategist and Chief Analyst of Cabot Stock of the Month
From Cabot Wealth Advisory August 27, 2015 Sign up for Cabot Wealth Advisory—it's free
Value investors suddenly have numerous opportunities to pick up good, high-quality companies cheap!
In my mind, there are two ways to do this.
Strategy One is to buy a quality undervalued stock that’s just pulled back to a decent support level, like Cognizant Technology Solutions (CTSH).
Strategy Two is to target a stock that’s gone off the rails, that’s been thrown to the dogs, like Schlumberger (SLB).
Schlumberger, in business since 1926, is one of the leading oil service companies in the U.S. With revenues of $44.6 billion in the past year, it’s had single-digit revenue growth in recent years, and the past two quarters have actually seen earnings shrink, as the pressure of falling oil prices has worked back to Schlumberger. But the company pays a dividend of 2.8%. And its current PE ratio is a lowly 15.
Here’s the chart, which reveals that investors in SLB have been abandoning ship in recent days. It’s now 42% off its high. No one likes oil stocks. And even the announcement yesterday that Schlumberger would spend $14.8 billion to acquire competitor Cameron (CAM) brought little buying.
If you’re in a gambling mood, you could jump into SLB here; it’s got to bottom somewhere. Or if you’re a bit less adventurous, you could buy some CTSH. Odds look good.
But what I really recommend is that you become a regular reader of Cabot Benjamin Graham Value Investor, where every month, Roy Ward, Cabot’s value expert, provides a complete overview of the market along with assessments of the top 275 value stocks.
Both Cognizant and Schlumberger are on this list, and Roy has specific Maximum Buy Prices for each one of them, prices that ensure that you don’t overpay for either of these stocks.
Roy’s system, which he’s been refining for 51 years, is rock-solid.
Over the 12 years the Roy has been with Cabot, his portfolio is up 250%, compared to increases of 98% for the Dow and 123% for the S&P 500. Click here for more information.
42, rue Saint-Dominique
Paris, 75007 France
|Index Membership: N/A
Sector: Basic Materials
Industry: Oil & Gas Equipment & Services
Full Time Employees: 120,000
3/21/16 Schlumberger (SLB): Profited Every Year in the Past 10