Halliburton Co (HAL)

Sell Halliburton (HAL-N) and buy Schlumberger (SLB-N) to avoid the superficial tax loss? This is one way of doing it. The rule is that you can't buy back the same security within 30 days. He prefers Halliburton.

(A Top Pick May 5/17. Down 8%.) Has put this in the International portfolio, really in the context of trying to capture some of the recovery of the oil cycle. The majors are starting to do a little bit of spending. Thinks there is more upside here and it is very cheap.

The #2 oil/gas services company globally, and the leader in US fracturing services. The stock has done nothing for a while because it is a pretty big conglomerate with a lot of debt and multiple services, with some areas still in the doldrums. Prefers some of the more pure-play companies in the US.

An oil service company. Along with the industry, they have come out of a trough that they hadn’t seen since the late 1980s. It was a very deep trough, and they are coming out of it. Their latest report was very upbeat. Rig counts are improving. They are gaining share internationally. Where just a week before, Schlumberger (SLB-N) had said their international business was suffering, this company came on and said “Ours isn’t”. Dividend yield of 1.6%. (Analysts’ price target is $54.)

(A Top Pick May 5/17. Down 7.97%.) Has a positive outlook on energy. Ultimately OPEC is going to be partial to higher prices over time. If we get in the $50-$55 range, there is tightness in the rig count in the US and some softness in the summer on oil prices, which will be good for this company. He still likes the story.

Fundamentally, the oil markets need to take duration (?) from the fact that Saudi Aramco has gone public. Saudi’s are getting $2 trillion and are trying to get close to 3, so they are looking to cut supply. When they cut supply, we’ll see higher prices and they’ll make way for US shale. They are planning the next phase of the Saudi economy on the back of that monetized asset. To monetize their assets to the highs levels, they are going to need higher prices. That means there is going to be more drilling, and this company is leveraged to that story. Dividend yield of 1.6%. (Analysts’ price target is $64.50.)

In general he has always recommended this company. It is excellent quality. Where he sees a challenge going forward is when you think about what is happening in the energy industry and other industries. Energy faces a couple of challenges of 1) low energy prices and 2) the environmental movement. Thinks offshore drilling is going to be under a lot of pressure going forward. You are essentially pouring $10 million into the ground, and maybe getting a pay off in 3, 4, 5 or 6, and that is a long time in a very uncertain world. They may not do as well as they have historically.

These things are all getting beaten up for various reasons. In this case there is also an M&A. They will eventually be the largest energy services company in the world. Don’t sell it here. If it gets below the lows of the last couple of years you might want to sell it.

He is particularly interested in it after their acquisition. It is cheaper than SLB-N.

With the recent bid for Baker Hughes, the price has fallen 10%. He is really dumbfounded by this whole situation. This was rumoured last Friday and they met all weekend. He finds this thing to be absurd and he just doesn't get it. If you own it, let this thing play out and see where it is going.

Acquiring Baker Hughes. Between this and Schlumberger (SLB-N), they will have anywhere from 60% to 90% market share, which will be more concentration than regulators are going to want to see. They will have to get through an antitrust test. There are going to be tremendous synergies. This is probably going to be a good deal.

Likes this and the energy services space a lot. In this part of the cycle, especially when the energy sector is moving up, these service companies are the ones that are most leveraged and tend to do well. This is a great one to own. Pretty cheap relative to the rest of the market. Looking for a 5%-10% pullback.

Outlook is better than expected. International business has done extremely well for them. Mexico offers a very big opportunity in the next 12 months. Domestically drilling in shale formations suggests a big upside for them.

Second biggest energy services businesses in the world. Involved in fracking. They are global. A cold winter did not impact them like Canadian-only companies.

(A Top Pick March 13/13. Up 37.21%.) Not much has changed. Still doing extremely well internationally. Still struggling a little bit domestically, but that is kind of fuel for the future. Quite excited about the fact that there should be some big activity in the US. They just need the well build cycle to build and domestically he thinks they will do quite well. On the international side they are growing at double digit revenue new growth.