Buy RIG or SLB today?
Clearly, the entire industry in hitting the bottom of a resistance level that has been tested, and held, 3 other times since 9/98. The basing pattern is wide and deep. It's time to buy. The bad news is in the stocks, and the momentum guessers have been shaken out. Despair is at its maximum. But which, to buy?
RIG and SLB both do something that other companies have a hard time duplicating. RIG probably has more of a franchise.
My main problem with RIG is the balance sheet. It looks to me like long-term debt, and total # of shares, has been increasing at a rapid rate, keeping pace with the rapid rise is sales. This is not the way to grow a business, from the viewpoint of an investor. The business should be grown out of cash flow, and RIG doesn't appear to be doing that. The total long-term debt is 853M, and the total cash was only 31M (at end of 3Q). That cash was down from 58M two quarters earlier. Does this mean cash on hand, assuming current conditions persist, will be zero in 2 more quarters? Will this company be a survivor?
SLB, on the other hand has a much prettier balance sheet. I have no doubts it will be a survivor. Cash>LTD.
If RIG is a survivor, it will probably bounce further than SLB when the industry recovers. I'm just uncertain, looking at the numbers, that it'll still be around. |
