Plenty of top name super investors continue to buy into this stock, and rightfully so.
National Oilwell Varco (NOV, Financial) is a beast!
Highlights (since 2005)
- Revenue is up over 375%
- Net profit is up close to 800%.
- Book value is up 300%
- Stock price is 92%
The company provides equipment and components used in oil and gas drilling and production operations, oilfield services, and supply chain integration services to the upstream oil and gas industry. Even if the current price per barrel is in the dumps, this industry is going nowhere.
National Oilwell conducts an impressive operation with over 1,235 locations across six continents through three segments: Rig Technology, Petroleum Services & Supplies, and Distribution & Transmission.
Rig Technology: designs, manufactures, sells and services complete systems for the drilling, completion, and servicing of oil and gas wells.
Petroleum Services & Supplies: provides consumable goods and services used in close to every area of the vertical.
Distribution & Transmission: provides maintenance, repair and operating supplies (aka MRO) as well as parts to drill site and production locations.
All this adds up to $22 billion in sales at a 12% net margin, giving the company a $21.38 billion market capitalization. Thanks to the skepticism around this industry YTD, the stock is off $11 (17%) from where it started, trading under 10 times earnings.
With these traits, the company has garned investments from some of the biggest super investors.
GuruFocus Roster
- John Rogers (Trades, Portfolio) with 722,935 shares
- Robert Olstein (Trades, Portfolio) with 96,000 shares
- Joel Greenblatt (Trades, Portfolio) with 260,055 shares
- David Dreman (Trades, Portfolio) with 4,401 shares
- Mario Gabelli (Trades, Portfolio) with 27,300 shares
- Jean-Marie Eveillard (Trades, Portfolio) with 13,540,058 shares
- Tom Gayner (Trades, Portfolio) with 475,000 shares
- Dodge & Cox with 14,269,362 shares
- Bill Nygren (Trades, Portfolio) with 3,540,000 shares
- Tweedy Browne (Trades, Portfolio) with 370,883 shares
- Warren Buffett (Trades, Portfolio) with 5,258,385 shares
Granted, all these shares add up to less than 10% of the proxy, but like we used to say in the brokerage business - all these guys can’t be wrong, right?
NOV meets all the criteria of a typical guru investment.
- Simple and easily understood business model.
- Strong financial position
- Undervalued stock price
Value Analysis
If the company continues to grow earnings at this rate, in five years the EPS could eclipse $10 a share. That, coupled with an oil recovery, could mean a forward P/E closer to 15 and a price per share around $150.
Using a baseline for future price of $108 (15% a year for 5 years), I think no matter how you slice it, NOV at this price can live up to and exceed expectations. Plus, buying in at a P/E ratio under 10 is always a good idea in a company with these credentials.
The company’s annual shareholder meeting is going to be held on May 13 and should shed light on how the management is handling the industry wide slowdown and expectations for the future. This is where finding management that is honest is vital because investors can only make money on what the company does from here on out.
