T. Boone’s Best Pickens
We all know that T. Boone Pickens is the man to watch when it comes to the oil and gas industry. Following his picks can prove to be helpful and even pay off. Pickens has his hand is all sorts of pots when it comes to stock, but here are Investment Underground’s four favorites.
…Chesapeake Energy Corporation (CHK): This company focuses on developing conventional and unconventional natural gas reserves onshore in the U.S. The company sports a beta of 1.33, a trailing P/E of 13.35, and a forward P/E of 11.22. Profit and operating margins currently stand at 18.94% and 28.71%, respectively. Recently, BHP Billiton (BHP) paid $4.75 billion for Chesapeake Energy Corporation’s gas assets in the Fayetteville shale formation.
Of all major drillers, Chesapeake maintains a dominant position and has a solid plan to reduce its long term debt and further increase production. We think shares could fetch upwards of $47, giving investors a good entry point at the time of writing. Even in a period of longer term depressed NG prices, companies like Chesapeake will continue moving toward oil and production of unconventional resources, all while selling off NG acerage to shore up their balance sheets…
…Halliburton (HAL): Pickens increased his holdings in Halliburton during the most recent reporting period at the average price of around $36 per share.
Halliburton provides products and services for energy development, exploration and production. The company currently sports a beta of 1.57, and Halliburton’s profit and operating margins stand at 10.2% and 16.7%. While we like Halliburton’s prospects, especially outside North America, and the oil and gas industry in general, we think investors should wait for a further dip in oil prices before purchasing shares of Halliburton.
At the time of writing, we believe the market is undervaluing the company. We advise adding shares in the low $40s range to ensure a 20% margin of safety…
Hess (HES): In 2010, the company grew GAAP EPS by 185.02% to $6.47, after declining by 68.65%. Revenues expanded by 17.06% to $34.61 billion, after shrinking by 28.17%. The EBT margin also improved to 9.57% from 5.15%.
HES shares trade with a P/S multiple of 0.8. The highest multiple was in 2007 with 1.0, but since 2001, the multiples were no higher than 0.7. Also, the company has a debt-to-equity ratio of 0.33. Revenue growth in excess of 20% this year would make a strong case for a P/S multiple of 0.9.
Apache Corporation (APA): Apache is one of the largest independent exploration and production companies in the world with plays throughout North America, and oil and gas projects in Egypt, Australia, Argentina and the U.K.
President Obama called natural gas’s potential as a vehicle fuel “enormous”, and Apache has already undertaken steps to push natural gas fuel. Apache announced that it would provide a compressed natural-gas fuel station at Houston’s George Bush Intercontinental Airport to serve the airport parking shuttle fleet. This move is likely just the first of many as Apache tries to expand the role of CNG-powered vehicles. Apache shares trade at $122 with a P/E ratio of 13.4.
Many of these stocks have been featured on our website in the past, but this just confirms the validity of our picks. If you aren’t familiar with the companies above begin your research starting here on our site. Check out the company profiles on HAL and others here.
Reported by Investor Underground, Read the entire article here.
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