As Oil Prices Trend, Tap This Driller for Energy Gains

While the oil drilling sector lags, WFT shows signs of life

   

As Oil Prices Trend, Tap This Driller for Energy Gains

Weatherford International Ltd. (NYSE:WFT) provides equipment and services used in the drilling, evaluation, completion, production and intervention of oil and natural gas wells to independent oil- and natural-gas-producing companies worldwide. The company was founded in 1972 and is headquartered in Geneva, Switzerland.

While the S&P 500 continues its inexorable march steadily higher, some sectors have actually not participated — with one sector, oil drillers, lagging sharply. Weatherford has been a recent underperformer to the sector as well, but is finally beginning to show some life.

Consensus earnings estimates are for $1.55 in 2012, putting its forward P/E right around the 10 level, in the lower quadrant for valuation. That being said, the company is growing at nearly 70%, with a price-to-book value of just 1.2, so shares are certainly cheap on a price-to-earnings-growth basis.

Technically, the shares are poised to break above the 200-day moving average at $17, which has also been a resistance level twice in the past.

Given the relative underperformance of the stock, I’m looking for WFT to break out to the upside and move to the $19 level by May options expiration.

Based on WFT’s current market price of $16.54 and using a target price of $19, a target date of May 18, 2012, and $1,000 of investment capital, this is an excellent candidate for capturing some nice gains by buying the WFT May 12 Calls or buying the WFT May 16-19 Call spread, or using another options strategy that best fits your trading style and goals.

For the full details on this trade, visit TradingBlock.com, create a free Instant Login and try the TradeBuilder feature, where you’ll see several ways to trade this name. Best of all, you can see a potential profit-and-loss outline for each strategy.

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Article printed from InvestorPlace Media, http://investorplace.com/2012/01/as-oil-prices-trend-tap-this-driller-for-energy-gains-weatherford-wft/.

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