Morningstar has a high recommendation on Varco (NOV) and Schlumberger (SLB). Both are beaten down due to oil prices and may still have some downside. But who can time the market perfectly ?
While SLB has a Wide moat rating, NOV has only a narrow moat. Both do have an A+ rating for credit meaning their balance sheets are strong. I like the story on SLB a lot, particularly the various defensive steps it has put in motion, its size, leading market position, etc. Russia is an issue, but I don't believe a company so big as SLB would not have hedged their investment appropriately.
SLB trades at 85.21 and has a Fair value estimate of 105 and Buy At recommendation of 73.50.
If one has a time horizon of 3 years, this would be a safe bet with very high potential returns if one hedges appropriately.
Possible trades are:
Buy/Sell with Jan 16 calls for strike 90 sold at 5.40
Buy/Sell with Jan 16 calls for strike 100 sold 2.48
A 50-50 combination of the above if one can afford it since upside potential is quite high.
Sell Jan 16 strike 90 PUT at 11.05
Happy Hunting !
• Asian shares held close to a two-month low on Thursday as softer oil and copper as well as US policy uncertainty kept sentiment in check, while high-tech stocks struggled to recover after a searing sell-off.
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