"When it comes to oil services, the world's most dominant company by far is Schlumberger (NYSE: SLB)," says Stephen Leeb, editor of The Complete Investor. Here, he looks at this "extraordinary" company.
"The question isn't whether inflation will worsen-it's how to protect yourself. Major and obvious lifelines we've stressed include precious metal and commodity companies, especially ones able to boost production.
"For additional inflation insurance, look to what Warren Buffett likes to call 'great companies.' These have two crucial characteristics that allow them to take inflation in stride.
"First, a great company is so dominant in its market that it can pass rising costs along to its customers. And second, it's in a market growing faster than the world's economy.
"Any company that satisfies these two criteria can grow faster than inflation. If it's also blessed with exceptional management, it can control its own costs through efficiencies and thus expand its market share.
"One such 'great company' is Schlumberger, which has a prominent role in every major oil project in the world. Barring a severe worldwide recession-which in any case would stall the frantic search for oil only temporarily-this broad-based technological leader is set to grow by better than 20% a year for at least the next five years.
"Its franchise is so strong that Schlumberger not only can pass along higher costs, it can pass them along with price increases to spare, as shown by its soaring measures of profitability.
"One metric that is not setting records for this extraordinary company is its market valuation, which in relative terms remains close to an all-time low. This is a remarkable disconnect that we expect will correct in the years ahead. Our two-year target is 170-200."
Each day, Steven Halpern's TheStockAdvisors.com offers the latest market commentary and favorite investment ideas from the nation's leading financial newsletter advisors.
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Reader Comments (Page 1 of 1)
5-14-2008 @ 2:52PM
Kenneth said...
It seems to me like the Oil companies and enjoying prosperity while the prices for the consumer keep rising. I think they should help find a solution to the rising costs before we all turn to alternate fuel sources.
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