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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Paul Senior who wrote (15432)	9/12/2002 1:11:38 AM
From: Spekulatius	Respond to of 79045

Oil service stocks- Paul you are right, timing is everything with oilservice stocks, the fortunes of the stocks in this sector are closely correlated. Right now the price of oil is high but nevertheless the oil service stocks are near lows. This is because the oil companies are spending only reluctantly maybe in expectation of lower prices in the future. Given the current economic climate this is a reasonable assumption. Disclosure: I sold my small DO trading position today. However LT management does make a difference. I like the fact that DO's management accepts the business reality that their business is cyclical. I also like the fact that they are conservatively managed with net cash in the bank, and a big chunk of the debt is due in 30 years and carries a 1.5% interest rate. This company is very unlikely to have negative headline use due to funky accounting etc. Their net assets would very likely fetch more than book value if liquidated due to aggressive depreciation (they sold one rig in 1999 with a gain). I also believe that they have the financial strenght to profit from distressed market conditions by buying assets on the cheap (as they have done in 1998). RIG on the other hand is very acquisitive, and has a sizeable debt (even though it appears very manageable right now). So this is why i believe that DO is the better bet given the current bear stock market that we have right now.