Pick-of-the-Week
Stick With What Works: HAL
Brandon Clay
The market is struggling.
It’s hard to overstate the problems in the first half of 2008. As of June 30th, the S&P 500 was down -12.8% while the Nasdaq was down -13.5%. Inflation is taking hold of businesses and consumers while jobs are becoming scarcer. In case you’ve been sleeping, it’s bad out there.
Still, not every sector is struggling. Quite the opposite. Energy continues to dominate the market as oil continues climbing. Tuesday, OPEC president Chakib Khelil indicated his organization was in no mood to substantially increase oil production. In addition, political uncertainties in Iran and Nigeria, as well as the falling dollar indicate crude could go even higher. All of these things make a bullish case for oil. Today, crude spiked again closing at a dizzying $143.57/barrel.
There’s a couple of different ways to play rising energy. For one, you could go the alternative energy route. If you do, keep in mind that alternative energy products take time to bring to market, and establishing the infrastructure to process the energy is another matter. Time, unfortunately, is sometimes against alternative energy. A second way to buy into energy demand is by investing in expanding existing production. Instead of inventing new ways to fill-up a car, why not bring more $143/crude to market. Companies who do that successfully will win. As we reminded our readers last week, sometimes it’s best to stick with what works . Taking our own advice, this week’s pick is a solid company bound to rise if the market continues its present course.
Halliburton (HAL) is an energy company many people know about. It’s the 2nd largest oil services company with a $46 billion market capitalization – Halliburton is big. From a growth perspective, big has some disadvantages. Not as nimble as the smaller companies, larger companies take time to retool for the market. Moreover, the bigger the company is, the harder it is to grow at the exponential rates of smaller companies. In short, big companies can be boring. Yet, boring can be good, especially in this market environment. How so?
Because Halliburton knows relationships. From May’s Abu Dhabi contract to the reliable business it has acquired since the U.S. invasion of Iraq, HAL has consistently grown its business in the past 5 years. They’re established in both the Middle East and United States. In an era of no-bid contracts and re-opening new areas of production, relationships are everything. Iraqi oil contracts are now being awarded . Halliburton should be able to get a piece of the action for their services. This is where being big pays off. On the technical side, HAL is in the middle of a strong 6-month uptrend. Climbing from a low of $30.00, it’s now trading above $53. Yesterday, HAL closed at another high showing continued momentum. To continue the energy play, look to Halliburton. Analysts'
Recommendation: | Strong Buy |
| 30 Days Ago: | Strong Buy |
|
| Analysts' Target: | $60 |
| Analysts' Targets |
| Citigroup | $63 |
| Buy |
Tuesday, July 01, 2008
|
| UBS Securities | $66 |
| Add |
Thursday, June 26, 2008
|
| Lehman Brothers | $68 |
| Overweight |
Tuesday, May 20, 2008
|
| Jefferies & Co. | $58 |
| Strong Buy |
Tuesday, April 22, 2008
|
| RBC Capital Markets | $61 |
| Outperform |
Tuesday, April 22, 2008
|
| Friedman, Billings, Ramsey & C | $55 |
| Strong Buy |
Tuesday, April 22, 2008
|
| Punk, Ziegel & Company | $52 |
| Hold |
| Monday, April 21, 2008 |
$50.27 (07/03/08)
