Stocks to Buy #1: Schlumberger (SLB)
Click to Enlarge Schlumberger (SLB) has a lot going for it on the fundamental side, which makes its positive chart formation that much more attractive. The oil-services company features exposure to robust secular growth trends, a rock-solid balance sheet, and reasonable valuation of 13.5 times forward earnings. This cheap P/E obscures a favorable growth story: After delivering EPS of $4.75 last year, Schlumberger is expected to post earnings of $5.73 and $6.76 this year and next.
These factors provide a tailwind that could lift the stock over a resistance point that has been in place for five years. As shown in the accompanying chart, SLB stock has encountered resistance at $95 on four occasions, most recently in autumn 2013. The stock has fallen back after closing last week at $93 — which means a move above $95 might take some time to play out — but the combination of improving fundamentals and a low valuation indicate that this should occur sooner rather than later. This would set the stage for an assault on the all-time high of $112 established in 2007.
Notably, Schlumberger’s industry peer Halliburton (HAL) is just short of its all-time high of $57.27, set in August 2011. A breakout by Halliburton would be a strong indication that SLB stock is on track to do the same.