Consider Schlumberger, because oil isn't going out of style

Posted Nov 18th 2009 6:00PM by Joseph Lazzaro
Filed under: Schlumberger Limited (SLB), Stocks to Buy

One can look at likely rising oil and gasoline prices one of two ways. You can get frustrated, or you can profit from it by buying Schlumberger Ltd. (SLB), which is why I'm reiterating my buy rating for the company, first recommended on May 6, 2009 at a price of $56.09. If you bought SLB in May, you're up about 18%.

Some in the oil sector remain concerned about the recovery in demand for oilfield services. Based on the growth track for emerging markets, that concern is not warranted: the natural gas segment may encounter some head-winds, near-term, because in that energy commodity, the glut of supply has actually been matched by a low price. But oil? Forget about it. Business is booming: the supply glut of oil has done little to lower its price, which shows one the many roles oil plays (alternative asset, inflation hedge, weak dollar hedge) in the modern economy, to Schlumberger's benefit. The First Call FY2009/FY2010 EPS estimates for SLB are $2.71 to $2.81.

Technically, Schlumberger's stock chart is in an uptrend, but with above-average volatility. Hence, if you're not comfortable with $7-10 stock price moves in a week, don't buy SLB. But if you are, you'll be in the chips: Schlumberger is headed north.

Stock Analysis: Schlumberger Ltd. 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 one month, 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: oil, oil production, OilProduction, Schlumberger Limited, SchlumbergerLimited

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Reader Comments (Page 1 of 1)

11-19-2009 @ 8:15AM

Louise said...

SURE IT IS GOING TO KEEP GOING UP. BUSH'S OIL WELLS ARE STILL PUMPING IN TEXAS. OIL WELLS THAT HADN'T WORKED IN MY LIFE TIME 65 YEARS, STARTED WORKING WHEN BUSH GOT IN OFFICE. BLAME AMERICANS OIL MEN FOR THE RISE, NOT FOREIGN OIL MEN. WHY DO YOU THINK THE SAUDIES HATED BUSH SO MUCH. TOOK PROFIT FROM THEM, AND STILL IS.