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Gold/Mining/Energy : Big Dog's Boom Boom Room
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To: Jacob Snyder who wrote (158144)11/30/2011 3:41:55 PM
From: Jacob Snyder  Read Replies (3) of 206093
 
RIG: bouncing at $42, a multi-year support line:

I just took a large position at $42, and I expect it to be a LT addition to my dividend portfolio. I'm assuming:
1. management means it, when they say the dividend is a LT commitment (0.79$/quarter = 3.16$ /year = 7.5% yield)
2. the LT trend is higher oil prices (with lots of year-to-year variability), and that means continued and growing deep-water exploration. RIG is a leveraged bet on high oil prices.
3. deep moat: the skills and equipment needed for deepwater drilling are so difficult and expensive, and the costs of failure are so high, RIG's position in its industry is guaranteed.
4. the LT effect of the BP/Macondo spill on RIG will be trivial. The ST effect is a buying opportunity.
5. With $11/share in cash, they can survive anything.
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