Expect profitable days with Schlumberger

Posted Sep 10th 2009 9:30AM by Joseph Lazzaro
Filed under: Schlumberger Limited (SLB), Stocks to Buy

True, Schlumberger's stock has meandered in the past three months, but that's just a disguise.

Oilfield and energy services company Schlumberger (NYSE: SLB), first recommended on May 6, 2009 at a price of $56.05, remains well-positioned to benefit from the secular trend of increased oil and natural gas exploration and development.

True, SLB's natural gas business may encounter some head-winds, near-term, because in that energy commodity, the glut of supply has actually been matched by a low price. And oil? Forget about a slump in the world's most important commodity. Business is booming: the supply glut of oil has done little to lower its price, which shows the many roles oil plays (asset, inflation hedge, energy source) in the modern economy, to Schlumberger's benefit.

Hence, it goes without saying that I'm reiterating my Buy rating for Schlumberger. The First Call FY2009/FY2010 EPS estimates for SLB are $2.66 to $2.63.

Stock Analysis: Schlumberger is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 50% position in SLB now; then buy another 25% in three months, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of your SLB position before December 2009. Sell/Stop Loss if you were to buy shares in this company: $27.

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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

Tags: energy sector, EnergySector, inthenews, natural gas, NaturalGas, oil, SLB