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CNN/Money is good enough to put out the top performing stocks of 2007 list. Most of the companies are fairly familiar, but leading the pack for the S&P 500 is National Oilwell Varco (NYSE: NOV), a stock almost no one has heard of.
The company has been in the right place at the right time. It makes equipment for the oil and gas exploration industry. With the global need for energy rising, NOV is a near-perfect investment.
The firm is not only growing due to a strong industry environment. It is also making what Wall Street thinks are some smart acquisitions. It announced it would buy oilfield service company Grant Prideco (NYSE: GRP) for $7.4 billion in cash and stock. Because the companies are in similar fields, chances are the duplicate costs can be taken out to improve operating margins.
In the September quarter, NOV net income doubled to $366 million, which beat analyst estimates. Backlog for its products also hit a record.
But, the success of National Oilwell Varco points out that in the market, it is better to be lucky than good. The odds that the company could have done so well if oil were at $30 a barrel are probably low. The demand for exploration would be substantially less. The need for drilling equipment would be modest.
National Oilwell Varco had a great year. If oil prices move down, Wall Street should not count on it again.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
12-27-2007 @ 5:44PM
ronald c mathis said...
nov has been a good friend. I bought it, it doubled, went up more, and I sold it. Now, I plan to do the same thing all over again. They are the biggest it their field. Oil is getting harder to find. The more that is true, the more nov will be hard at work. It will take years for alternate energy to replace oil to any significant degree.