Cheap Stocks to Buy Now – Hercules Offshore (HERO)
Price as of 8/14/14: $3.24
Oil stocks haven’t really been all that kind to investors over the last few years. Weak pricing coupled with weaker energy demand in emerging markets has hurt the bottom line.
However, long-term investors should always have some energy exposure in their portfolio. And while fracking is all the rage right now, there’s no denying that a lot of the “easy” onshore energy is gone and energy companies will increasingly have to explore offshore and deepwater oil fields to keep up with global demand.
There’s where drilling services company Hercules Offshore (HERO) comes in.
Now, Hercules’ stock price is down more than 55% in the last year thanks to a lot of short-selling, some analyst downgrades and a painful restructuring But the company divested a number of barge-based rigs in 2013, and has posted a profit in five of the last six quarters — with revenue growth to boot. The company is going to finish fiscal 2014 in the black, and is trading for a paltry 8 times its forward earnings.
Now oil stocks will never trade for a mammoth premium, but at worst, HERO is fairly valued after the crash — and its improved balance sheet shows this stock is not going to disappear.
It might take some time to turn around the sentiment, but I’d be confident in making an investment despite the big drop because Hercules is profitable and it operates in a business that is sure to have decent baseline demand — if not growth — in the years ahead.