Warren Buffett Is Buying Up National Oilwell Varco And So Should You! $NVO
$NOV is one of our favorite oilfield services stocks and this has not changed. It has jumped almost a full $11 from $68 to almost $79 today. EUROPEAN EMBARGO OF IRANIAN OIL WILL MAKE YOU MONEY
T. Boone Pickens has also long been a $NOV bull. We pointed out he was buying on July 12 2012. The stock was trading around $65 then and is up almost a full $14 since then. T. BOONE PICKENS IS BUYING THESE STOCKS RIGHT NOW This is a full 18% gain since then.
Now Warren Buffett is a buyer and a big one. As if this isn’t a big enough reason already to want to buy National Oilwell Varco we will give you several reasons from our research.
NOV has a growth by acquisition strategy. It acquired about 300 businesses over the past 15 years. It completed nine acquisitions just in the first half of the year. The company has a staff dedicated to the process of acquiring new companies. NOV has the knowledge and experience to scope out good companies and to effectively integrate them into its business.
Mr. Buffett knows a good value when he sees it. NOV is clearly undervalued with a forward PE ratio of 11.27, a PEG of 0.79, and a price to book ratio of 1.73. It looks like a good time to start a position in the stock for the long-term.
NOV has a market cap of $32.67 billion. It has a double-digit profit margin of 13.6% and an operating margin of 19.82%. For the past twelve months, the company had operating cash flow of $939 million. The balance sheet also looks good with $1.92 billion in total cash, $1.45 billion in total debt, and a current ratio of 2.01.
NOV has expected earnings growth that fits Warren Buffett’s requirement of at least a 15% compound annual growth rate (CAGR) from a combination of dividends and earnings growth. The company is expected to grow earnings annually at 16.25% for the next five years. It also pays a modest dividend of 0.60%.
The long-term prospects for the company are promising since it becomes more difficult to extract oil and gas in new areas. Drilling rigs are now under pressure to be more complex and to drill deeper. The need for highly deviated and horizontal wells is on the rise. NOV has many tools and solutions to get the job done. It provides the support and infrastructure for many aspects of the fossil fuel extraction process. As of the end of the 2nd quarter, NOV had a backlog of $11.3 billion, of which $4.9 billion is expected to contribute to revenue for the remainder of 2012.
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