For many years now, Halliburton Co. (HAL) has been the poster child for all that is wrong with the Bush administration. From trading in the single digits in 2002, the large oil and gas service company has been propelled forward by policies that greatly favored oil companies.
Almost unadulterated, HAL moved from those single digit days to more than $40 per share. Fueling the appreciation were higher oil prices and the potential for greater revenues on efforts to increase supplies of crude.
When the oil market collapsed in mid-July HAL actually held up fairly well. It was only when the price accelerated to the downside, did investors flee HAL seemingly all at once.
It was not a mirage. Hedge funds losing millions on bad commodity bets triggered a forced selling of all stocks tied to the oil trade. Suddenly no one wanted to own HAL and shares fell by 50% or more.
Now, back in the high teens, HAL may be a stock to own for the long-term investor.
On Monday the company announced that excluding items the company made a profit of $687 million, or $0.76 per share. This exceeded the Wall Street consensus estimate of $0.73 per share.
The news was well received. Shares of HAL were higher by nearly 10% on Monday in the aftermath of the announcement. Have we found a bottom?
Perhaps, especially given that OPEC and other oil producing nations are expected to reduce production in order to stabilize prices. Over the long haul, the fundamentals for higher oil prices are quite bullish.
With shares of HAL trading 50% lower than its 52 week high, it may make sense to take a position. The weak economy may play havoc with numbers and pricing in the short-term, but the market may already be discounting the weaker environment.
From a valuation standpoint, shares of HAL are cheap. At current prices, the company trades for just 6 times forward earnings. Such a level is historically cheap and compares favorably to the valuation of competitor Schlumberger (SLB).
Even though the price of oil has fallen substantially from the highs of this summer, they are at such a level to encourage more drilling and exploration. Business at HAL should be strong with oil above $50 per barrel.
As mentioned above, forced sales of a good company had as much to do with the selling of HAL. Fundamentals are still strong, but hedge fund liquidations care not for valuations. In a rush to raise cash, the mantra of sell baby sell outweighed the benefits of drill baby drill.
That environment is bullish for those that take a position today. At the moment, fear has the upper hand. If oil prices stabilize, that should put a floor in on the downside risk at HAL.
I would put HAL on any list of stocks to own going forward from here.
This article was written by Jamie Dlugosch, contributor to InvestorPlace.com. For more actionable insight like this, go to: www.InvestorPlace.com and check out:
