Richard / Kerm Klassic
As my buddy Ronald would say, now thar yu goo agann.
Here's the flip side of that posting which was made just a few weeks back in time.
MEDIA / Wall Street Journal - Oil Service Stocks May Be Pricey After Run-Up
Tuesday September 23 4:03 AM EDT
NEW YORK, Sept 23 (Reuter) - A recent run-up in oil-services stocks has left some of the stocks overvalued, the Wall Street Journal reported in its 'Heard on the Street' column, citing investors.
Yves Siegel, senior oilfield-services analyst at Smith Barney, told the paper's electronic edition Tuesday that, "There's going to be a lot more short-term volatility" among oil services stocks.
"The earnings expectations are rising dramatically, and you need to be sure that hurdle isn't too high," he added, according to the paper.
The paper said that Transocean Offshore (RIG), for example, has gone from trading at 14.3 times prospective earnings in the last 12 months, to 18 times earnings.
Smith International (SII) was among oil-services stocks whose ratings Smith Barney's Siegel cut, because of overvaluation concerns, the paper said.
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It's quite difficult for me to justify investing at this time into the service sector, especially the drillers. Focusing on the oil and gas producers, I have missed the gigantic run in shares of these companies. Beyond the drillers, there are companies like Prudential Steel, Mullen Transportation and Tesco - all with heavy ties to the oil & gas industry and whose shares have appreciated quite handsomely.
So, where does a guy like me go to if investment is sought in the service area. The high flyers are still at lofty share prices - I rule them out. It's amazing how analysts still favor investment into these companies - even with high valuations.
I have decided to check out UPSTART companies. My initial investment into the sector is Hyduke Capital, a company whose background I have pretty much documented. I understand their 1st quarter report is due out any day now and they are expected to report revenue and earnings for the quarter which is to exceed the whole of the previous 12 months. Now, I consider this a good upstart situation. Forward 12 month earnings (Fiscal 98 Earnings) should fall in the $0.40/share range of which I place a value of $6.00/share based upon 15X earnings. Since shares are trading just over $2.00, I would consider this a good value with above average return potential. I'm not pushing the company (again, I am a share owner), rather just providing a direction for one to perform their own due diligence. Just a name change too more identify company operations would probably be worth an additional $1.00/share.
I would like to hear from anyone regarding small upstart companies in the oil and gas services sector who have not been fully recognized in the marketplace. I am specifically interested in companies providing services at the well site.
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