This week, I am recommending that you sell your position in offshore oil drilling play Transocean Inc. (RIG). Not that it’s been a bad run. The stock is up a solid 13.32% since Jan. 10 and you also booked triple-digit profits that averaged 107.94% when we closed out of the options on Jan. 19. But with Transocean reporting worse-than-expected results last week, I think there are better oil plays out there.
So this week’s Global Bull Market Alert pick moves from “offshore” with Transocean (RIG) to “onshore,” with Calgary, Canada-based Nabors Industries (NBR), the largest land drilling contractor in the world.
Boasting 554 land drilling rigs in North America, NBR conducts oil, gas and geothermal drilling in the lower 48 states, Alaska, Canada, South America, Mexico, the Middle East, Russia and Africa. NBR also provides well-servicing activities, such as engineering, transportation, construction and maintenance for national oil and gas companies.
Unburdened by the negative fallout from the BP oil spill, NBR recently reported better-than-expected fourth quarter and full-year 2010 results. The company’s earnings per share soared by 144% year-over-year to $0.44, surpassing the consensus estimates of $0.37 cents — and far above the 12 cents earned in the year-ago quarter. Revenue also soared 59% to $1.33 billion, beating consensus estimates of $1.26 billion. For all of 2010, NBR generated total revenue of $4.21 billion in 2010, up 18.6% year-over-year from $3.55 billion and 1.4% above estimates of $4.15 billion.
Equally importantly, management expects a 50% to 60% increase in earnings in 2011, fueled by greater prospects of the fluids management division and completion of a high-value project in the Alaskan region. NBR is also poised to expand its “U.S. Lower 48” segment, having secured six new build rig contracts last quarter. At the same time, NBR is trading at a mere P/E of 12.8. With this kind of growth, that makes the stock a bargain.
So buy Nabors Industries (NBR) at market today and place your stop at $24.50. If you want to play the options, I recommend the June $30 calls (NBR110618C00030000).
Portfolio Update
Alliance Resource Partners LP (ARLP) rose another 1.38% this past week, closing near record highs. This bet on the bull market in coal remains a BUY.
Cognizant Technology Group (CTSH) ended the past week down 1.57%. However, EVA Dimensions upgraded the stock last week to a buy. CTSH is a BUY.
Denison Mines Corp. (DNN) dropped by double-digit percentages last week, before rallying 7.76% on Friday. The company announced that it sold 18.3 million common shares of Denison shares at a purchase price of $3.55 per common share for aggregate gross proceeds of $65 million. This is a great time to add to your position. DNN remains a BUY.
ELEMENTS Rogers Intl Commodity Agri ETN (RJA) ended the week down as agricultural commodities pulled back from their highs. With “agflation” still out in full force, RJA remains a BUY.
Bank of Ireland (IRE) ended the week down 1.13%. Rather than selling assets at fire-sale prices with the losses covered by already over-stretched Irish taxpayers, Ireland’s new government wants to negotiate with the EU/ECB to fund, on a longer-term basis, the transfer at par value of relatively secure Irish bank loan books into a “warehouse” or Special Purpose Vehicle. This would be good news for IRE. With the stock still under its 50-day moving average, I am keeping IRE at a HOLD.
Ivanhoe Mines (IVN) ended the week flat. This bet on the “Mongolian miracle” remains a BUY.
National Bank of Greece SA (NBG) dropped sharply this past week. Alpha Bank has closed the door on a merger offer by NBG, with officials of the acquisition target saying it would amount to the “quasi-nationalisation” of a private lender. This story isn’t over yet. NBG remains a BUY.
Novo Nordisk A/S (NVO) ended the week 1.48% lower — although it hit record highs a week ago. Bouncing off of its 50-day moving average, this bet on the global diabetes epidemic remains a BUY.
Sina Corporation (SINA) is scheduled to report its earnings after the market’s close on Tuesday. Sina is expected to show big profit growth, with consensus earnings estimates of 45 cents per share, up 45% from a year earlier. Its online Twitter-like service, Weibo, has been adding 10 million users per month. Sina is a BUY.
Spreadtrum Communications, Inc. (SPRD) rose 1.72% this week. The recent pullback off of its highs is an opportunity to add to your position. SPRD is a BUY.
Silvercorp Metals Inc. (SVM) ended the week slightly lower. With silver prices trading at record highs, and the stock trading above its 50-day moving average, SVM is a BUY.
