Anadarko Petroleum - hmmm, getting interesting

Posted Feb 6th 2007 6:17PM by Sheldon Liber
Filed under: Rants and Raves, Competitive Strategy, Getting Started, Columns, ETF Investing, Entrepreneurs, Anadarko Petroleum (APC)

Anadarko Petroleum (NYSE:APC) is on my watch list. It closed today at $42.47 down 48 cents. It popped up on my screen when it hit my target of $42.00 per share and a price-to-earnings (P/E) ratio near 5; that's very low for this caliber of company.

So I took a closer look at some other factors. I already liked the fact that they are deeply involved in energy -- a currently undervalued segment of the economy. Half its oil and natural gas reserves are in North America and management has been making good decisions for a decade, so the track record is there. One decision I like was increasing its reserves and selling some Gulf Coast assets.

Anadarko has a 52-week high of $56.97 and is near it's low of $39.51. At 36% off it's high it is looking very tempting. Oil and natural gas prices are down significantly and APC's price reflects that; however, I'm thinking, do they go up from here, or down -- which is more likely? I say up eventually, and sooner rather than later. What do I get if I buy and hold? Maybe 'dead money' for six to nine months plus a small dividend yield of .83% or maybe prices rise and the stock just makes a small move up.

It seems to me that this is what we all would like: a downside with a margin of safety and a good likelihood of major appreciation. The price-to-sales ratio of 2.8 is higher than I like but not unreasonable, and the book value is 1.41. If the ghost of Benjamin Graham is looking over my shoulder I think he is saying you're on to something here kid! Actually I know I'm on to something here. The profit margin is 35% and the Return on Equity, Assets and Invested Capital are all multiples of the P/E.

So I stared at a few other details and lowered my alarm to $41.00 and will revisit the issue again soon. I try not to be in a rush. I made no buys in January and I may not make any in February. My last stock buy was Valero Energy (NYSE: VLO) at the end of December for $51.00, which closed today at $55.30.

Check out my other posts for BloggingStocks here.

Sheldon Liber is the CEO of a small private investment company and the vice president for design and research at an architecture & planning firm.

Tags: Anadarko Petroleum (APC), AnadarkoPetroleum(apc), Benjamin Graham, BenjaminGraham, Energy Sector, EnergySector, Sheldon Liber, SheldonLiber, Value Investing, ValueInvesting

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Reader Comments (Page 1 of 1)

2-07-2007 @ 2:08AM

Dennis said...

Sheldon, I like the way you think- I passed on APC months ago at 42, was somewhat sorry 'til now- when it started up, it had pretty good little pop-little surprised to see it back down here. When it starts up again,depends on number of variables whether it will be back again-lot of crazy stuff going on in world.If goes below 42,I'm in this time-plenty of upside potential,hardly any downside.Good luck.

3-04-2007 @ 11:41AM

BxCapricorn said...

This is the current favorite on my blog
www.fineartofresurfacing.blogspot.com, and we're watching it closely, with constant analysis and discussion. Would love to have APC watchers, review and comment.