Another “Contrarian Bonanza” — “world-beating stock that has recently been unfairly taken to the cleaners”

Teaser pick revealed from Tom Essaye and Martin Weiss

By Travis Johnson, Stock Gumshoe, January 13, 2012

I said I’d keep digging into the picks from Martin Weiss and Tom Essaye as they teased ’em for their Million-Dollar Contrarian Portfolio service, so let’s sniff around and see where the clues send us.

The first unveiling of one of these picks, if you missed it, also included the basic background on the MDCP — you can see that note here if you want to catch up with the rest of the class.

It’s OK, we’ll wait.

Ready? Great, here are the clues for the second “Contrarian Bonanza” pick:

“Contrarian Bonanza #2 is another world-beating stock that has recently been unfairly taken to the cleaners by panicky investors:

“According to Wall Street’s rumor mill, in 2012 this contrarian bonanza could suffer significant costs due to lawsuits over the British Petroleum oil spill in the Gulf of Mexico.

“But this company is NOT British Petroleum — and if anybody had bothered to go beyond simply listening to the gossips and busy bodies, the company’s fundamental business is NOT growing weaker …

“It’s growing much, much stronger!

“Income from continuing operations is up as much as 59% in the last six months.

“For the third quarter of 2011, the company reported a mind-blowing 42% surge in total revenues.

“Plus, the company is a leader in new shale drilling technology — a major, game-changing revolution with the potential to make the United States a bigger player in natural gas production than Saudi Arabia is in oil production.

“But the crowd isn’t interested in facts. Rumors are far more exciting. Gossip is far more scintillating. And so, despite the fact that this company is positively THRIVING, its stock has plunged a mind-blowing 40% since last July alone!”

Sounds interesting, right? We like surging revenues and crashing share prices, that tends to be worth checking out.

So what’s the solution? Well, we have a slight difference on some of the clues … but this pretty well has to be Halliburton (HAL)

Which in the third quarter reported 40% revenue growth. And which is a leader in unconventional oil and gas services, including shale drilling stuff. And which has fallen almost exactly 40% since last July (which was a peak), from about $57 to $34. And which was the fourth name tied to the Deepwater Horizon disaster, so they carry the spectre of potential lawsuits and liabilities (don’t know what that potential might be, but it’s almost certainly weighing on the minds of at least some investors).

And really, there are probably plenty of people who don’t want to buy Halliburton just because Dick Cheney was CEO for five years, back when he had a pulse in his pre-VP days.

But that said, it’s dang cheap even for an oil services company, and it does seem, from a quick overview, like it’s very well positioned for the current oil market, particularly with their focus on support for unconventional oil and gas in North America. Of course, Halliburton also has its hands in most of the worrisome oil patches around the world, so they also get lots of one-time write-offs and political backlash — they had to write off some reserves, for example, when the Libyan Revolution put a pause on oil production from that country.

Halliburton trades at about 12X trailing earnings, with heady growth expectations that give them a PEG ratio around 0.4, which is downright cheap even if you worry about liability or falling natural gas and oil prices. Doesn’t mean the stock can’t get cheaper, of course. They have never gotten the premium valuation that their larger competitor Schlumberger (SLB) enjoys, but they’re otherwise priced fairly similarly to some of the other big oil services names you might have heard of, like Baker Hughes (BHI) or Weatherford (WFT) — and I think HAL is much closer to SLB than the others are in terms of profit margins and diversified operations, so you could certainly argue that there’s the potential for HAL to rise a bit to close that valuation gap with SLB.

Which is, actually, one of Essaye’s main points in the ad “presentation” — that he likes companies who are beaten down and undervalued relative to peers, especially if they’re in sectors that are generally undervalued as a whole, and I guess HAL fits those criteria fairly well. Whether or not that means it will pop in the months ahead and recover that 40% decline over the last six months, well, that’s your call to make — it is, after all, your money. Let us know with a comment below if you’ve got any thoughts on HAL or other favorite “contrarian” oil services stocks … and we’ll be on to our next “contrarian bonanza” in a few minutes.


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16 Comments on "Another “Contrarian Bonanza” — “world-beating stock that has recently been unfairly taken to the cleaners”"

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Lois
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Lois
January 13, 2012 12:58 pm

Owning Halliburton would make me feel “dirty”…. like selling my soul to the devil.

MonV
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MonV
January 13, 2012 1:12 pm

Owning Halliburton is slick!

SRS
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SRS
January 13, 2012 1:13 pm

It would make me feel good – for once, I’ll be making the Devil pay me, rather than the other way around.

jw
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jw
January 13, 2012 1:09 pm

Just sold my sole to the devil!! Bought it! I like it. Evil is greed! Greed is good!

Jack
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Jack
January 13, 2012 2:01 pm

Well, at least you didn’t have to sell your soul. Or both soles – then you wouldn’t have any boots left at all!

alan
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alan
January 13, 2012 1:27 pm

Short HAL !!!! Whatever Weiss’ MDCP says, the opposite tends to apply. Just read the zillions of comments earlier on this site and on Google about the Weiss’ MDCP. Do your own Due Diligence before you invest a penny. Youve been warned.

jessfarr
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jessfarr
January 13, 2012 1:37 pm

What about Mitcham Industries (MIND) ?

james
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james
January 13, 2012 1:43 pm

http://www.youtube.com/watch?v=iXFevUc0UaQ

If you have been burned and lost money, check these people out!

Garry
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Garry
January 13, 2012 1:53 pm

Appreciate you and the Thinkolater very much and wonder if u have anything on the latest Phase 1 Stansberry tease of a gold junior in Canada with massive reserves? Thanks. The problem with HAL I have is that idiot former Vice President!

Jack
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Jack
January 13, 2012 2:03 pm

I think that was the Friday Irregulars item this week. Send the Gumshoe the pittance he asks and find out!

JOHN
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January 13, 2012 2:14 pm

Ditto that.. Chenney was one of the sleeziest VP’s we ever had..WPOS!~!!

Charlie
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Charlie
January 13, 2012 4:34 pm

I think you are getting ahead of yourself. As far as I know their first pick is not to be released until Feb. 1st.. At least that is what their web conference told us..on Thur..

Denny
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Denny
January 13, 2012 8:00 pm

What does Cheny’s association with HAL years ago have to do with it’s investment value today?

Tom t
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Tom t
January 14, 2012 1:03 am
I’ve owned HAL for months, so far it goes up and down with oil. Its true Larry (Uncommon Wisdom) made mostly good predictions regarding the last couple of months, but the comments regarding their “picks” not doing well is true also. I Just read some “fractal analysis” by a South African- really incredible observations of market behavior similarities (ie VERY similar chart patterns over extended periods -usually years- uncanny really). If your wondering – the charts similarities predict precious metals to launch soon (weeks?months?) and stocks to fall. The basis for this man’s analysis is different than anything I’ve come… Read more »
Nic
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Nic
January 14, 2012 9:48 am

I have been waiting for this same Head and Shoulders pattern to complete before I starting my strong Short position. I can see the market continuing to chop until about August of this year, when it falls to pieces. Just one man’s opinion, but I was right about the crash in late 2007 and reaped huge profits by moving to a 90% short position.

fatboy228
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fatboy228
January 15, 2012 1:06 pm

Nic,
what would be an example of a 90% SHORT position?
I’m good at income investing but would have no clue as to “shorting”.

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