Driven by declines in global inventories and easing trade tensions between the U.S. and China, oil prices have risen more than 7% so far this month.
CNBC reported the commodity fell on Wednesday, however, after the Energy Information Administration recorded a bigger-than-expected drop in U.S. crude inventories and Iraq, which is a member of OPEC, said it would consider increasing output cuts amid ongoing demand concerns.
Brent crude prices fell 0.19% to $62.25 a barrel on Wednesday, while West Texas Intermediate declined 0.61% to $57.05 a barrel.
Based on these developments, investors may be looking for opportunities in the energy sector that gurus also see value in. As of Sept. 11, the GuruFocus Aggregated Portfolio, a Premium feature, found oil and gas drilling companies that were popular with gurus included Helmerich & Payne Inc. (HP, Financial), Patterson-UTI Energy Inc. (PTEN, Financial), Transocean Ltd. (RIG, Financial), Valaris PLC (VAL, Financial) and Diamond Offshore Drilling Inc. (DO, Financial).
According to the GuruFocus industry overview page, they are also the five largest companies in the oil and gas drilling sector.Ă‚
Helmerich & Payne
With a combined equity portfolio weight of 2.19%, 12 gurus are invested in Helmerich & Payne.
The Tulsa, Oklahoma-based driller has a $4.61 billion market cap; its shares were trading around $42.89 on Wednesday with a forward price-earnings ratio of 31.15, a price-book ratio of 1.13 and a price-sales ratio of 1.62.
The Peter Lynch chart shows the stock is trading above its fair value, suggesting it is overpriced.
GuruFocus rated Helmerich & Payne’s financial strength 7 out of 10. On top of comfortable interest coverage, the Altman Z-Score of 3.04 indicates the company is in good financial health.
The company’s profitability and growth scored a 5 out of 10 rating. While Helmerich & Payne is weighed down by margins and returns that underperform industry peers, it is supported by a moderate Piotroski F-Score of 4, which implies operating conditions are stable. The business predictability rank of one out of five stars, however, is on watch as a result of declining revenue per share over the last five years. GuruFocus says companies with this rank typically see their stocks gain an average of 1.1% per year.
Of the gurus invested in Helmerich & Payne, Ken Fisher (Trades, Portfolio) has the largest stake with 1.32% of outstanding shares. Other guru shareholders are Steven Cohen (Trades, Portfolio), Chuck Royce (Trades, Portfolio), Prem Watsa (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Ray Dalio (Trades, Portfolio), Michael Price (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Paul Tudor Jones (Trades, Portfolio), John Hussman (Trades, Portfolio) and Caxton Associates (Trades, Portfolio).
Patterson-UTI Energy
With a combined weight of 6.41%, 10 gurus have positions in Patterson-UTI.
Headquartered in Houston, the company, which provides land drilling and pressure pumping services, has a market cap of $1.98 billion; its shares were trading around $9.77 on Wednesday with a price-book ratio of 0.64 and a price-sales ratio of 0.71.
According to the median price-sales chart, the stock is trading below its historical average.
Patterson-UTI Energy’s financial strength was rated 4.9 out of 10 by GuruFocus. Weighed down by a low cash-debt ratio, the Altman Z-Score of 1.45 warns the company is in financial stress and could be in danger of going bankrupt.
The company’s profitability and growth scored a 4 out of 10 rating on the back of negative margins and returns. Patterson-UTI is supported by a moderate Piotroski F-Score of 4, however, as well as a one-star business predictability rank, which is on watch due to a decline in revenue per share over the past five years.
With 3.20% of outstanding shares, Simons’ firm is the company’s largest guru shareholder. Other top guru investors include Kahn Brothers (Trades, Portfolio), Fisher, Arnold Van Den Berg (Trades, Portfolio), Greenblatt, Royce, Murray Stahl (Trades, Portfolio), Cohen, T Boone Pickens (Trades, Portfolio) and Mario Gabelli (Trades, Portfolio).
Transocean
With a combined portfolio weight of 10.09%, eight gurus hold Transocean.
The Swiss offshore driller has a $3.36 billion market cap; its shares were trading around $5.70 on Wednesday with a price-book ratio of 0.25 and a price-sales ratio of 1.05.
Based on the median price-sales chart, the stock appears to be trading below its historical average.
GuruFocus rated Transocean’s financial strength 4.1 out of 10, weighed down by poor interest coverage. In addition, the weak Altman Z-Score of 0.32 warns the company could be at risk of bankruptcy.
The company’s profitability and growth scored a 5 out of 10 rating. Despite having declining margins and negative returns, Transocean is supported by a moderate Piotroski F-Score of 6 and a one-star business predictability rank.
PRIMECAP Management (Trades, Portfolio) is the company’s largest guru shareholder with 8.41% of outstanding shares. Simons’ firm, Arnold Schneider (Trades, Portfolio), Third Avenue Management (Trades, Portfolio), Van Den Berg, Fisher, Lee Ainslie (Trades, Portfolio) and Stahl are also shareholders.
Valaris
With a combined weight of 3.93%, eight gurus are invested in Valaris.
The offshore drilling contractor, which is headquartered in London, has a $1.32 billion market cap; its shares were trading around $6.78 on Wednesday with a price-book ratio of 0.09 and a price-sales ratio of 0.41.
The median price-sales chart shows the stock is trading below its historical average.
On the back of a low cash-debt ratio and weak Altman Z-Score of 0.32, Valaris’ financial strength was rated 4.1 out of 10 by GuruFocus. It’s also recorded a decline in revenue per share over the last five years
Weighed down by negative margins and returns, the company’s profitability and growth scored a 4 out of 10 rating. The low Piotroski F-Score of 1 indicates business conditions are poor. It also has a one-star business predictability rank.
Of the gurus invested in Valaris, Van Den Berg has the largest holding with 0.46% of outstanding shares. Other top guru shareholders are Francisco Garcia Parames (Trades, Portfolio), David Einhorn (Trades, Portfolio), Simons’ firm, Fisher, Richard Pzena (Trades, Portfolio), Gabelli and Pioneer.
Diamond Offshore
With a combined equity portfolio weight of 0.05%, five gurus have positions in Diamond Offshore.
The Houston-based offshore drilling contractor has a market cap of $1.07 billion; its shares were trading around $7.74 on Wednesday with a price-book ratio of 0.27 and a price-sales ratio of 1.07.
According to the median price-sales chart, the stock is trading below its historical value.
Weighed down by a low cash-debt ratio, and weak Altman Z-Score of 0.69, Diamond Offshore’s financial strength was rated 4.1 out of 10 by GuruFocus.
The company’s profitability and growth scored a 4 out of 10 rating on the back of negative margins and returns and a low Piotroski F-Score of 2. The company has also recorded a decline in revenue per share over the past five years, resulting in its one-star business predictability rank being on watch.
With 1.42% of outstanding shares, Fisher is the company’s largest guru shareholder. Royce, Simons’ firm, Stahl and Pioneer also own the stock.
Disclosure: No positions.
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