Recent Buy

buyAs I’ve mentioned a few times now, I’m a bit cautious on buying stocks in the energy sector. This is mostly due to the fact that I was fortunate enough to load up on many supermajors and pipeline companies at much lower stock prices that also happened to coincide with higher oil prices. As such, my exposure to energy in general is actually a bit heavy for my liking.

Additionally, I’m also unsure as to when oil prices might rebound. Thus, I’m being cautious here. A protracted drop in oil prices may result in better valuations down the road. Furthermore, some firms may have difficulties increasing their dividends if oil prices remain this low for, say, five or ten more years. I think that scenario is unlikely, but not impossible. The truth is that nobody really know where oil is going.

That said, I do see a few clear-cut values in energy, and it’s difficult for me, as a value-oriented investor, to ignore these completely. I always view short-term volatility as a long-term opportunity, so I decided to take advantage of that.

One of my holdings has continued to slide, most recently after releasing a fourth quarter report that was operationally great, but also uncertain about future growth. This allowed me to average down yet again, much to my delight.

I purchased 25 shares of National Oilwell Varco, Inc. (NOV) on 2/4/15 for $52.86.

Overview

With corporate history dating back to 1862, National Oilwell Varco is a leading worldwide provider of equipment and components used in oil and gas drilling and production, as well as oilfield services.

The company conducts operations in over 1,200 locations across six continents.

They operate in four segments: Rig Systems (42% of fiscal year 2014 revenue), Wellbore Technologies (24%), Completion & Production Solutions (20%), and Rig Aftermarket (14%).

NOV provides all the heavy equipment necessary for oil and gas drilling, including rigs, derricks, rotarys, blowout preventers, mud pumps, wireline winches, cranes, drill pipes, drilling motors, drill bits, and transfer pumps, among many other products. They are essentially a one-stop shop for their clients. Anecdotally, they are nicknamed “No Other Vendor” as a play on their stock ticker, referring to their dominance in their product lines.

Fundamentals

This company sports some extremely impressive fundamentals across the board, made perhaps even more impressive by the fact that they also held up quite well during the last downturn in commodities back in 2009.

So let’s take a look at their growth over the last 10 years.

Revenue increased from $4.645 billion in FY 2005 to $21.440 billion in FY 2014. That’s a compound annual growth rate of 18.52% over that period, which is nothing less than outstanding.

But it gets better.

Earnings per share improved from $0.91 to $5.70 over the last 10 fiscal years, which is a CAGR of 22.64%. I can tell you that after investing in dozens of companies and analyzing far more, it’s not common to run into a business that has grown at such a phenomenal rate over a decade.

S&P Capital IQ is anticipating that EPS will grow at a -1% compound annual rate over the next three years, which is down significantly since their last report in the fall (that report anticipated compound annual growth of 14%). Again, it’s really impossible to forecast where oil and drilling activity will be over the next three years, as even the CEO of NOV can’t really tell where things are going. However, even if NOV goes nowhere over the next three years, the company is in an excellent position to capture growth when the market eventually rebounds. Furthermore, and more importantly to me, the dividend is so well covered that they could potentially continue handing out rather substantial dividend raises even absent core growth in the business.

Speaking of the dividend, the metrics there are also fantastic.

The company has increased its dividend for the past six consecutive years, after initiating a payout policy back in 2009.

And the raises themselves have been significant – the five-year dividend growth rate is 78.2%.

Yielding a very attractive 3.48% right now, the dividend seems more than sustainable with a low payout ratio of just 32.3%.

I love investing in companies that are responsible with shareholders’ cash. Using leverage too aggressively can cause grave harm to a business, especially when we’re talking about businesses that are exposed to cyclical commodities. NOV’s use of leverage is extremely responsible, with one of the best balance sheets in the industry.

The long-term debt/equity ratio is 0.15 and the interest coverage ratio is over 36.

NOV’s profitability is also solid across the board. The company’s net margin has averaged 12.28% over the last five years. Return on equity finished at 12.1% last fiscal year.

NOV is also aggressively buying back shares after announcing a $3 billion buyback plan in 2014. They purchased 11.6 million shares for $779 million during the year, which reduced the share count some 2.7%. That leaves more than $2.2 billion on the authorization to buy back shares on the cheap, which, as you can imagine, is something I’m particularly excited about.

It’s important to note here that the stock dropped rather heavily after the company reported Q4 2014 results, where the company beat EPS estimates by $0.09. However, that beat was helped by especially strong growth in Rig Systems, which is NOV’s largest segment. If you look at the fine print, though, you’ll notice that that segment’s growth was fueled by drawing down the company’s sizable backlog. The backlog for Rig Systems now stands at $12.5 billion, which is down 13% year-over-year.

But that backlog is still large enough to fuel the segment all by itself for more than an entire year, even if we were to factor in a worst-case scenario of 0% book-to-bill. Furthermore, this backlog is actually high by the company’s historical standards – CEO, Clay Williams, noted on the earnings conference call this this backlog is 19% higher than what the company entered the 2009 downturn with.

Qualitative Aspects

Of course, we invest where a company’s going, not where’s already been. While the short-term is volatile and uncertain for NOV as well as the entire energy sector, I remain confident about the long-term demand for energy when looking at global population trends and growing middle classes around the world.

From what I can tell, this appears to be an old-fashioned supply-and-demand issue. Oversupply in the market combined with softening demand causes prices to drop, as it should. However, cheap oil has a way of counteracting itself. Firstly, lower oil prices means major producers are less inclined to drill for oil, which reduces supply. Secondly, consumers and businesses alike are more likely to consume energy when prices are low, increasing demand. This combination will most likely normalize supply and demand, but it’s impossible to say how long that will take. In addition, it’s difficult to say what oil should be priced at over the long term, though I think it’s unlikely that a barrel of oil is still priced at $40 10 or 20 years from now since demand will very likely rise and supplies are naturally finite.

Where NOV shines is that they’re well positioned to capture growth from this eventual turnaround. They differentiate themselves via their product lineup and diversification. It’s estimated that they enjoy a #1 or close #2 market share in every product line in which they compete in. Even companies that compete in certain product lines, like Schlumberger Limited (SLB) purchase products from NOV.

The company manufactures nearly every single product necessary for drilling oil and gas. A rig manufacturer cannot viably avoid NOV’s products due to NOV’s diversification and dominance in this space. Moreover, the company produces most of the products necessary for the drilling process itself, meaning they should enjoy a comfortable stream of recurring revenue for years to come from not only initial product sales themselves, but also via consumables and spare parts.

The company is particularly acquisitive, with over 200 acquisitions over the company’s history. Commodity weakness has hit a number of companies in this space, which could present attractive acquisition opportunities. The company has seven letters of intent in play along with a number of potential prospects above and beyond that. For a net acquirer like NOV, this could provide them a short-term opportunity to pick up a few quality companies at cheap long-term prices.

Risks

NOV’s major risk is the potential for a protracted drop in oil prices. If this situation remains as such for a long period of time, it very well could impact NOV’s ability to grow operations and its dividend. NOV is diversified across products and geographies, but they still rely on producers’ capital expenditures budgets. In addition, they’re an aggressive acquirer, which could result in overpaying or integration issues. Lastly, failure of a major component could tarnish NOV’s brand name.

Valuation

The stock is available for a rock-bottom P/E ratio of 9.27, which compares extremely favorably to not only the broader market, but also NOV’s five-year P/E ratio average of 14.1. Moreover, that five-year average seems cheap itself, considering the quality of the company. The issue here, however is that it’s difficult to forecast where earnings will be in a year from now, especially if the order flow remains low due to protracted weak oil pricing. Nonetheless, this appears extremely cheap for a long-term investor.

I valued shares using a dividend discount model analysis with a 10% discount rate and a 7.5% long-term growth rate. That rate is lower than what I’ve recently used for NOV, as I’m adjusting it to reflect near-term headwinds. However, the long-term story seems more than intact. That growth rate is about 1/3 of what NOV’s been able to produce in EPS growth over the last decade. Factor in a low payout ratio and strong cash flow, and I think this is reasonable. The DDM analysis gives me a fair value of $79.12.

Conclusion

This is a company that’s been around for more than 150 years, so they’ve prospered through much worse conditions than what we currently see today. They have the kind of breadth and diversification across products and geographies that should allow them to continue doing well over the long haul. In fact, between a sizable share repurchase program (more than 10% of the company) and the potential for cheaper acquisitions, it’s possible they’ll exit this period of turbulence in better condition than they entered it in. Fundamentally, this an excellent company.

The stock is down over 37% over the last six months alone, shaving ~$8 billion off the company’s market cap. I have to ask myself whether this company is permanently worth some $8 billion less today than it was just six months ago? This stock appears to be disproportionately punished, even among oilfield services stocks. Of course, I’m pleased with that, as it allows me as well as the company to purchase shares on the cheap. And I’ve been doing just that, as this is the second time I’ve averaged down since initiating a position in the company toward the end of last year. The stock is currently sold for book value, which is just incredible in comparison to other stocks in this space. In addition, that’s about 60% lower than the five-year average.

I’m going to include a couple of other valuation opinions below, as I use these to concentrate my reasonable valuation estimate:

Morningstar is currently revising their fair value estimate due to falling oil prices and reduced expectations for revenue. Up until fourth quarter results were announced, Morningstar rated NOV as a 5/5 star value, with a fair value estimate of $84.00.

S&P Capital IQ just updated their valuation after fourth quarter results were announced. They rate NOV as a 3/5 star hold, with a fair value calculation of $60.00.

This purchase adds $46.00 to my annual dividend income, based on the current $0.46 quarterly dividend.

I’ll update my Freedom Fund in early March to reflect this recent purchase.

Full Disclosure: Long NOV.

What are your thoughts on NOV? Are you interested in picking up energy stocks here? What have you recently been buying? 

Thanks for reading.

Photo Credit: Stuart Miles/FreeDigitalPhotos.net

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112 Comments

  1. Nice purchase DM. This looks to be a nice stock to be in and the price has dropped significantly in the recent past and it is very close to 52 week lows. The yield is not that great compared to other oil related stocks, but the dividend growth has been great in the last few years as you mentioned. The oil price has rebounded nicely in the last few days and the price of oil stocks (COP, CVX etc) has gone up around 10% from their lows. Any idea why NOV hasn’t rebounded during the same time frame?

  2. You are on a role! I really wish I had capital to invest, but I have to hold it aside for expenses relating to a new career I’m starting. Otherwise, I’d STILL be taking advantage of these low energy prices! NOV is one of my top holdings.

  3. Nice buy again! Coulda sworn a couple months back I asked you about this and you said you liked it,
    But Exxon more?

  4. DGJ,

    I can’t really comment as to why NOV’s stock price went the opposite way, but I’m very happy it did. I wouldn’t mind seeing it go down into the mid-$40s or so. 🙂

    I actually think the yield is really attractive here. It’s quite a bit higher than the other oilfield services stocks, which is what it should be compared to. Meanwhile, the balance sheet is also better. And its cheaper.

    We’ll see how it goes, but I can’t imagine I’ll be unhappy with buying NOV in the $50s when looking back on it 10 years from now.

    Cheers!

  5. Joey,

    Best of luck with the new career there!

    I know how you feel. I was also uncertain as to how much I’d be investing when switching to writing full time last year. I’m confident it’ll work out well for you. Stocks aren’t going anywhere. 🙂

    Thanks for stopping by.

    Take care!

  6. You’ve been picking up a fair bit of NOV recently. Are you concerned about the general slow down of capital investments by oil companies/recent report of drillers idling their rigs?(bloomberg) Might make an impact on the companies demand for its products, although if they have a backlog that would serve as a good cushion. And that yield is pretty nice and a low payout to support it. But who knows, oil has gone up a bit from its low $40’s, lets both hope it rebounds and we get some div raises 🙂

  7. Billy,

    Hmm, not sure. I looked at NOV in the fall and initiated a position in the company back in November (NOV for November – ha!).

    I like XOM as well, but I’m not particularly enthusiastic to buy here right now. I was fortunate enough to buy in the $80s when oil was also a lot higher. I wouldn’t be surprised to see XOM much cheaper by the end of the year, in which case I might be interested in adding. If not, that’s okay too. 🙂

    I will note that XOM and NOV are totally different companies. Hard to really compare the two directly.

    Best regards!

  8. DW,

    Right. That’s why I highlighted the long-term investor comment in the article. High-quality companies are rarely cheap when everything is going perfect. I can’t think of one time I ever bought a great company at a cheap price when everything was just peachy. There was always some kind of “But what about such and such?” And that will always be true.

    Over the next year or so, visibility is low due to lower capex from the producers. Beyond that, it’s hard to say where things are going, but I think you have to ask yourself whether or not the world will continue to run on oil and gas over the long haul. If you think so, then NOV will do very well over that time frame.

    So the stock could very well go lower. And I’d love to see that. Not only would I have an opportunity to buy more if I so wished, but the company would be buying back shares at a much cheaper price as well. Lower stock prices don’t phase me at all. Fundamentals do, but, as I stated, they’re entering this downturn in better condition than last time. So we’ll see. 🙂

    Thanks for stopping by!

    Best regards.

  9. Another buy and the Freedom Fund gets larger while your proximity towards hitting your goal of $7,200 of dividends this year gets closer.

    I’m currently not really looking at any energy companies in particular at the current moment, however, I’m not opposed to dipping my toes in should something strike my fancy. Currently I’m considering snagging some EMR and JNJ to get some initial exposure as both would be new positions in the war chest.

  10. W2R,

    Another cog in the wheel. 🙂

    I like those stocks as well, particularly EMR right now. I absolutely wouldn’t mind owning some more EMR at the current price. Excellent company with an outstanding dividend growth record. Excellent choice!

    Have fun shopping.

    Best regards.

  11. Hi Jason,

    I’m considering adding supermajors like CVX and COP, few other companies like JNJ, GE, PM and some utilities to round out my portfolios. I do not own financial companies and look forward to them as well perhaps later part of year.

    Looks like NOV is a great buy and should inflate the passive dividends income further and take us to path of FI 🙂

    Keep up the great work!

    Best,
    PIM

  12. PIM,

    Nice! Sounds like some prudent moves there. All great companies. Gotta love the yield there across those stocks as well.

    Thanks for sharing. Looking forward to seeing where you go with your capital. 🙂

    Take care.

  13. I like the buy Jason…we’ve also been picking up shares of NOV lately. In fact, we may add more if it gets closer to $50. We originally bought in in the low 60s and we felt it was a good deal then. In the low 50s, NOV certainly screams value right now. AFFJ

  14. FR,

    Thanks so much. Appreciate the support!

    I’m doing my best with the dividend income goal. The year is off to a nice start. 🙂

    Hope your journey is going well over there.

    Cheers!

  15. AFFJ,

    NOV seems to make a lot of sense to me here. The stock price could go anywhere in the short term, but this is an excellent company from everything I can see. Happy to be able to add here at this valuation. That stock buyback couldn’t have been timed better. 🙂

    Thanks for stopping by!

    Best wishes.

  16. Excellent decision Jason. The backlog is a Kerry factor that gives NOV an edge, in addition to good metrics, especially that ridiculously low PE!

    Could EMR be next on your target sighting? It’s looking like a great office right now too.

    Cheers

  17. I’m still not in the energy space but I can totally understand the desire to average down on a position that is glaring long term value. Sure the near term may be rocky and no one knows where anything is going really. All you can do is load up when the valuation metric and yield screams ‘buy.’ Of course averaging down doesn’t hurt either. Thanks for sharing.

  18. Hi DM!

    I also have NOV in my portfolio and I’m also looking to average down at some point. I also have a couple of companies that might benefit from lower oil prices like DIS and KO. I’m currently looking to find some higher yielding companies to my portfolio. PM might be my next move but do you know other companies I should take a look at (not sure about T because of the low growth). I’ve found that your blog is a great place to find new ideas and I’m a frequent visitor now at your blog. Thank you very much!

  19. Great minds think alike. I added to my position in NOV on Friday at $50. Couldn’t pass up buying on the new low. Thanks again for the write-up.
    MrStockFox

  20. As the oracle of Omaha says, if you plan to be a net purchaser of stocks over the next ten years, sell-offs are your best friend! When we can add deep value to our strategy of quality companies that pay ever-rising dividends, that’s a win-win-win.

    Like you, my portfolio has a big “Texas Tilt” (oil heavy) and I like it that way for accumulation. Volatility equals opportunity, and over 20-30 years, the volatility in oil when combined with dollar cost averaging and dividend reinvesting gives you better yield on cost than the perennially expensive Colgate Palmolives and Cloroxs.

    And, when the household brands, beverages, foods, etc. become better valued, you have your own oil empire providing fresh cash to deploy quarterly.

    Keep up the good work!

  21. I’ve been eyeing the energy/oil sectors trying to determine when to get in on the action. Buy when people are fearful… Well, this sounds like this is the right time. But for me there’s not enough blood in the streets yet to want to pull the trigger quite yet. I know this sounds like I’m trying to time the market but… well yeah I guess that’s what’s going on. I guess I’m just trying to build up a decent cash position in the meantime until I find a deal that really catches my eye.

    I wonder if there really is a difference in trying to time the market and looking for the right opportunity? To me it just sounds like a better way of wording “market timing”.

  22. I’ve only been following you for a few months now, but it seems like 75% of the time you announce a new buy it’s something I’ve been buying or have been thinking of buying. I don’t know if that’s a sign of group think, or like minded individuals:)

    I’m waiting for an ESPP transaction to hit my account so I can deploy it elsewhere. NOV and PM are two near the top of my watch list. I was also buying T, UL, and OKE when you were. And probably a few others I just don’t recall.

    I do not own BBL. It’s on my watch list, but I’m still investigating the business and the industry (I’m not sure I know enough about the later to pull the trigger). DIS and IBM are on my list. I’ll probably buy IBM for me, and maybe DIS for the grandkids.

    The only companies I’ve been buying that you don’t own are AMT, MMP, and SE.

    Keep up the good work. I wish I’d started dividend investing at your age! I didn’t start until about 7 years ago (at 48).

    IB

  23. DM,

    I am new to the blog and am thoroughly enjoying reading about your journey. It is very inspirational. I am very impressed with your analysis of the various stocks you buy. Can you shed some light on where you get this fundamental information and how you analyse it? Thanks!

  24. I would like to preface this by saying I am a big fan of your site. But I do not think that this pick is as simple as “If you think the world will be using oil in the future, NOV will be just fine.” NOV is a technology company. There is a clear obsolescence risk with this stock. Oil will likely be a primary energy source in 5 years, but I am not entirely convinced NOV will maintain its market leading position or have the technology capable to extract it. While I think this is a good value play in regards to the dividend, it is outside of my circle of competence. Unless you are in the oil business, I imagine it is out of yours also.

    Best of luck with your goals. I will keep reading your fantastic site.

  25. Hi Jason,

    Looks like a great investment, with a very low P/E in comparison with its 5-year average. I particularly like the low debt and high debt coverage. Looks like you’re onto another winner here – great stuff!

    DL

  26. DM,

    Nice buy. I see a lot of value in this name, as well as OKE. Currently have BAX on my radar as well. I like quality assets at value prices and I think all three names represent just that! What’s your thoughts???

    Good luck,

    j-harr

  27. I like the stock long term as well, but having a backlog is not the same as having cold hard cash in the bank, SDRL can tell you about backlogs.

    If times get really tough for NOVs clients, guess what happens to that backlog…something to consider for sure.

  28. M,

    NOV seems pretty solid to me. Fundamentally, it’s an excellent company. The low P/E ratio might be misleading since there’s low visibility for earnings over the near term, but the strong backlog will help buoy them over the next year. If the energy sector’s woes are more protracted, then that’s probably something that’s going to hit all energy companies anyway. But I think, long-term, this is a great investment.

    EMR is definitely on my watch list. I wouldn’t mind adding to my position one more time. I haven’t bought any in quite a while now, but it’s definitely one of the best industrial companies out there. So many stocks, so little capital. 🙂

    Thanks for dropping by.

    Cheers!

  29. DivHut,

    I’ve always been served well by averaging down. Catching the bottom is probably impossible, but it’s not really necessary. I worry about price relative to value, not price relative to price. A bigger gap between short-term price and long-term value is just an opportunity, in my view.

    We’ll see how it goes! 🙂

    Thanks for stopping by.

    Best regards.

  30. Sampo,

    Glad you’re finding some ideas here. I put my money where my mouth is, so most of the ideas I write about are stocks I either own, am buying, or am interested in buying. 🙂

    PM seems like a solid bet. The RRPs provide a lot of upside if they catch on. Currency is holding them down right now, but that’ll normalize over the long term.

    Take care!

  31. MSF,

    Great buy and great price. I think NOV is worth much more than this over the long term. The buyback couldn’t have come at a better time. 🙂

    Cheers!

  32. JJ,

    Exactly. I couldn’t agree more with Buffett there. It’s always interesting how some people get upset when stocks go on sale, yet cheer when almost anything else in life (food, gas, clothing, etc.) goes on sale. Unless you’re absolutely never going to buy stocks again, one should hope that the market is extremely volatile with substantial drops fairly often.

    I hear you there on the energy allocation. I’m very heavy for what I’m comfortable with, but energy stocks have been generally attractive over the last 3-5 years and, with the recent volatility, some are very attractive right now. Let’s hope that those dividends keep flowing, which will allow us to balance things out over the long haul. 🙂

    Best wishes.

  33. Zee,

    Investopedia defines market timing as:

    “The act of attempting to predict the future direction of the market, typically through the use of technical indicators or economic data.”

    I’d agree with that. As such, I don’t think looking for better opportunities than others is market timing. Holding onto cash specifically because you believe a certain company or sector or the broader market will be better priced at some point in the near future, however, could be construed as market timing. I make no such attempts. I buy stocks when I have capital, but I pick out what I think are attractively valued opportunities.

    I’ve done my best to show that market timing in terms of anticipating future moves isn’t only impossible, but unnecessary. Regularly investing your active cash flow into solid opportunities that fit your needs now is a great way to build growing passive cash flow, which is ultimately what most of us are after. 🙂

    Cheers!

  34. IB,

    Sounds like you’ve got a nice watch list over there. Plenty of opportunities. 🙂

    You and I have a similar problem in that there are plenty of stocks to buy, but not enough cash for them all. The good news, however, is that our snowballs will accelerate over time, assisting our endeavors.

    Keep it up!

    Cheers.

  35. Hi DM,

    This one seems to be one for the long run which should give you lots of pleasure in the long term. I expect some more buying opportunities the coming time due to all the CAPEX cuts from the big E&P’s, but NOV is in my opinion the best positioned from all the equipment vendors to weather this storm. With their balance sheet and strong leadership they should be one of the last to go down in their sector if there would be a total melt down and that is just simply unimaginable. Congrats 🙂

  36. theinvestmentmd,

    I’d have to disagree. I don’t think it’s particularly difficult to understand the components that NOV manufactures and/or how oil and gas is extracted. If that were the case, I’m not sure I’d feel comfortable being invested anywhere in energy. Furthermore, is there a particular reason why you think their products will be less relevant or more obsolete in five years than they have been over the last 150? I just don’t see it.

    However, I do agree that you shouldn’t invest in a company if it’s outside your circle of competence. I would never invest in a company if I weren’t comfortable with my understanding of the business. I don’t understand every iota of every company I invest in, but I feel comfortable with my basic knowledge around their terminology, how they make money, and how they should be able to make money going forward.

    Cheers!

  37. DL,

    Thanks!

    The fundamentals are pretty solid. I also like that balance sheet. That allows them to be quite flexible right now. So if an attractive acquisition comes up, they have a lot of play there with liquidity. Let’s see how it goes. 🙂

    Thanks for stopping by.

    Cheers.

  38. j-harr,

    They seem solid to me. I purchased OKE not long ago a little below $45. I certainly wouldn’t mind more at $46 if I had room for it. BAX reminds me of the legacy Abbott a bit. Perennially undervalued, though BAX lacks the long dividend growth streak.

    Happy shopping. 🙂

    Best regards.

  39. DFG,

    I’ve heard some people comparing NOV to the companies selling picks and shovels during The Gold Rush. That’s a pretty good analogy. Instead of trying to pick which miners would have success, you bet on the company selling the supplies. 🙂

    Thanks for stopping by.

    Best wishes!

  40. Sundeep,

    Agreed. Though, SDRL and NOV are not only completely different companies, but their backlogs are/were completely different as well. Tough to really compare the two. I never understood how Seadrill came out of seemingly nowhere and could continue to prosper with horrible FCF. But I guess you have your answer there.

    Best regards!

  41. AJ,

    Nice! I’m not sure if I’ll add again or not. It’d be tough to avoid one more tranche in the low $40s, if it gets there. I know Einhorn initiated a good-sized stake in the company not too long ago. It’ll be interesting to see if he continues to average down as well.

    Thanks for sharing. 🙂

    Best wishes.

  42. Tawcan,

    I noticed a lot of fellow bloggers started buying NOV after I initiated my stake in the company last year. I hope it serves us all well over the long haul. 🙂

    Cheers!

  43. Gremlin,

    Haha. I am pretty hungry. 🙂

    Not sure how much heavier I’m going to go in energy here. But I keep saying that and keep investing there anyway. Sheesh!

    Thanks for stopping in.

    Cheers!

  44. FI,

    Thanks for the thoughts. 🙂

    I agree. Unless there is some kind of total meltdown that impacts them in a way that is unprecedented, they should be fine over the long haul. I think the worst-case scenario is that they have to cut the dividend, but the coverage there against FCF over the last decade has certainly been more impressive than most supermajors. We’ll see how it goes!

    Hope all is well with your journey.

    Best wishes.

  45. Nice buy, Jason.
    It’s always great to average down on a company with solid fundamentals. I’m already heavy on NOV. I would like to average down one more time but I think I will wait until it falls well below 50$.
    Instead I might jump at JNJ this time. It’s falling below 100$. That could be a good point to initiate…

    Cheers.

  46. DM,

    Regarding your point about understanding the NOV manufacturing or extraction, tell me what technological principle sets NOV’s drilling components apart from others. Tell me how long the patents will last. Tell me why NOV’s products are better than HAL, SLB, or BHI. Also, since NOV revenues are so dependent on oil prices, will they be profitable in several years? What if oil never goes back up over $80 per barrel?

    Even Buffet has commented (Youtube video of talk given to UGA students) that a circle of competence doesn’t necessarily mean understanding every bit of a business but understanding where the business is heading. He gives the example of chewing gum. He states that he can have some reasonable amount of certainty that people will be chewing gum in the future. Since chewing gum is a profitable business and brands have higher barriers to entry, if he owns the majority of the chewing gum manufactures (Wrigley, Trident, etc…), then he will likely have more money from his investment than not in the future.

    But even those in the oil industry have no idea with a reasonable amount of certainty that NOV will be making more money in 5 years than now. You could be precisely wrong with this pick.

    Regarding the issue of the business being profitable for 150 years, you are falling prey to the problem of induction (aka “the turkey problem”). Just because the turkey is fed by a merciful master every day for his entire life doesn’t mean that he wont get his head cut off the day before Thanksgiving. Ironically, the turkey is the most assured right before the slaughter happens. You could have also made the same argument about Lehman Bros in August of 2008. It too had been around for a long time.

    I think you have mitigated your risk by having a diversified portfolio and making NOV a small percentage. You could say you bought with a significant margin of safety but if the cash flows are so variable, you really don’t know what your margin is.

    I admit that I am partially responding to a comment you made regarding Mattel previously. You told me you had no idea where MAT would be in 10-20 years. I guess having kids myself I see that electronic devices don’t replace all toys. My cousins are also crazy about Monster High (a Mattel brand). So when I see you say that you have some vision about NOV in the future, I want to call you on it. Because I don’t think you really do.

    Another pick is BAX. I am a physician and I wont even invest in medical companies because I have no idea where they will be in the future. There is just too much turmoil and innovation in the sector.

    Again, I respect your ideas and writing tremendously. I personally like when others attack my investing ideas. There is more to be gained from trying to prove something wrong than trying to find things to confirm it. Hopefully you will find my response helpful.

    Keep writing and Ill keep reading!

  47. Tabula,

    If I were to buy a driller, it’d be HP. Though, I don’t see much of an economic moat there, which is true for pretty much all drillers.

    My big concern with HP revolves around the dividend. They have a very lengthy dividend growth record, but it’s only since 2013 that they’ve paid out something substantial. Their FCF has been routinely negative over the last decade, which is worrisome. Overall, I’ve not been overly impressed with the economics of drillers.

    I think HP is a fantastic driller. I’m just not sure I’d like to own a chunk of any driller.

    Just my opinion on it.

    Cheers!

  48. Jos,

    I’m in the same boat as you. Probably won’t average down again unless it falls another 15%, which I hope it does. 🙂

    JNJ is a great company. My largest holding. Can’t imagine you’d be unhappy with that decision a decade from now.

    Thanks for sharing!

    Best wishes.

  49. Rob,

    Good stuff. Happy to be a fellow shareholder. There appears to be clear-cut value here if you look at their historical valuation and strong FCF generation. I’m excited. 🙂

    Cheers!

  50. theinvestmentmd,

    Sounds like you’re sore about me picking on MAT for some reason. And you took my comment out of context. I was speaking to not knowing about the security of their business model when looking out over the next 10-20 years due to the onslaught of digital entertainment. They have obviously had a problem with that, as their growth has stalled. As far as not knowing exactly where MAT will be 10-20 years, that’s true for them and every other company. Unless you have some kind of crystal ball, you won’t know where any company will be in the future. Investing involves a degree of betting. If you’re looking for absolute security, you should probably put your capital under your mattress. Of course, you’ll lose value to inflation. But it sounds like you might sleep better.

    “I wont even invest in medical companies because I have no idea where they will be in the future.”

    Right. Again. None of us knows for certain where a company will be in the future. You simply have to invest when the odds are on your side. None of us have any 100% certain idea where any company will be in the future.

    It’s funny you speak about Warren Buffett and circles of competence. You may want to take a look at Berkshire’s portfolio. You’ll notice National Oilwell Varco there.

    As far as patents go, you can view some of NOV’s patents here:

    http://www.nov.com/Segments/Wellbore_Technologies/IntelliServ/Patents.aspx

    In regards to competition, there is competition in every industry. What is your point? I’m not quite sure you have one. Does one not invest in Pepsi because they can’t determine whether or not they’ll be able to fend off Coca-Cola over the long haul? Do one not invest in Norfolk Southern because CSX also has similar routes? Does one not invest in Wal-Mart because there are other retailers that sell similar/same products? If you’re looking for the perfect company in the perfect industry with no competition and one where you can be absolutely certain where they’ll be at an exact date in the future…well…I’m afraid you’ve got it all wrong.

    NOV and its competition do not directly compete with each other in every product line, and, as mentioned, some competitors have to purchase products from NOV. You can view NOV’s product lineup here:

    http://www.nov.com/ProductIndex.aspx

    You can view SLB’s product and services lineup here:

    http://www.slb.com/services.aspx

    You’ll notice differences if you care to look.

    I’m not here to sell anyone on anything. I present information as I see it and I share my journey to financial independence with the world. If you don’t like NOV, that’s fine by me. A lot of stocks out there that you can invest in. Though, based on your criteria, I can’t honestly think of any.

    Cheers!

  51. Hey Mantra, You been rooting down the back of the couch for loose change? I thought you were saving your money to pay your tax bill 🙂 You certainly believe in this stock. Surely a good long-term buy? I’m considering topping up my holding too… All the best!

  52. Jason,
    I didn’t wait for the price to drop below $50 (but it turns out that I could have). I doubled my stake in the company at about $52 which brings my average cost to $59.34. Short term worries maybe, but we’re in this for the long haul.
    Be blessed,
    KeithX

  53. Nice buy! This company is clearly undervalued, even with short term noise. I imagine you’ll be very happy you averaged down here in just a few short years. Good job sticking to the plan and thank you for sharing. Have a good week!

  54. Quick question – where do you come in on the whole notion of timing. I know you can’t know what will happen but knowledgeable people in the industry seem to think that this downturn will be prolonged – maybe even several years, deeper than we thought, and oil could go as low as $30.

    This is coming from someone who bought NOV at 10% over the current price. I like the company too, but it just seems like is there a rush to buy more since there’s probably going to be lots of more downside to come…!?

  55. Nick,

    Haha. I’ll probably be turning up couch cushions for cash when my tax bill comes around. I’m addicted to dividends. I have a problem. 🙂

    Glad to be a fellow shareholder. Wouldn’t blame you if you add here, though there are always competing opportunities out there.

    Thanks for stopping by!

    Best regards.

  56. KeithX,

    That’s a very nice cost basis for the long haul. I personally think that NOV’s long-term value is far above ~$60, so I think you’ll do well here. We’re in it for the long haul, so this volatility is a wonderful opportunity. Much like there was opportunity there when TGT was in the mid-$50s not long ago.

    Thanks for sharing.

    Best wishes!

  57. dzogen,

    Like I mentioned in the article, nobody really knows where oil is going and how long it’s going to stay there. Were these same “knowledgeable people in the industry” predicting this recent drop six months before it occurred?

    I don’t believe in timing things like this, because there’s no evidence it can be done. I prefer to value companies based on all known fundamental and qualitative information and buy when there appears to be a margin of safety there. If a stock drops soon thereafter with long-term fundamentals intact and I have capital, then I’m likely to buy more.

    NOV could very well go lower. Or it could go higher. Or it could stay where it’s at. I don’t pretend to have any idea about that. I just buy when it seems to make sense and I have capital. That’s served me well thus far. The problem with timing is that you don’t know when the bottom hits. And by the time it starts rising, you might be waiting for it to go back the other way.

    But if you believe cheaper prices are yet to occur due to oil being priced at $30 for the long haul, then I wouldn’t recommend buying any energy stocks here.

    Best regards.

  58. I think this is a great buy and it will do well over the long term. In the short term, there will be some pain of it possibly going lower. As it is impossible to know what will happen in the future, I still believe this will be a great long term investment.

    I am actually shocked that my major energy holding, ERF , is doing as great as it is right now. I am still quite below my cost basis buy the weighting is still quite high in my portfolio.

  59. IP,

    Thanks!

    I agree. Could go anywhere over the short term, but it’s my belief the company will do well over the long haul. It’s all documented here, so we’ll see exactly what happens either way. 🙂

    I’m likewise shocked that many of the supermajors have held up so well. I wouldn’t be surprised to see many of them much lower as lower oil really works its way through. If I had to guess, it would seem that the volatility is front-loaded here with a stock like NOV whereas it might be back-loaded for some of the supermajors.

    Thanks for stopping by!

    Best wishes.

  60. Ryan,

    I have a pair of noise-canceling headphones on all the time. I can’t hear the noise. 🙂

    Appreciate the support. I can’t imagine that in five years from now I’ll be unhappy picking up NOV here, but anything is possible. We’ll see how it goes!

    Thanks for stopping by. Hope you have a great week as well.

    Cheers!

  61. Keep on averaging down! Long term investors have the ability to wait it out for the rebound so as long as the fundamentals are good, I don’t see why buying more would ever be a problem. With any luck the price will stay depressed for a while long so you can reinvest at these cheap prices if you choose too.

    Good purchase!
    ADD

  62. Hi, I started reading your blog a year ago. I have been saving since I was 18 but never invested in the market till 28! And even when I did it was a small ammount. It wasn’t until I started reading personal finance blogs like yours (@32!) that I felt like taking up this subject and researching it for myself. Must say you have really stuck to your message over all these years.

    Noticed that you do not have industrials like CAT, Parker in your portfolio…just curious what you thought of some exposure to those especially CAT.

    Keep up the good work. Cheers. -Andy

  63. ADD,

    I’m with you, my friend. I’m also hopeful that the price stays low for a while yet. Not only will that benefit me, but it’ll also benefit the company’s share buybacks. 🙂

    I can see how this recent volatility would be a big bummer for stock traders or short-term investors…which is why I’m neither.

    Thanks for dropping by. Keep up the great work!

    Best regards.

  64. DM,

    Very nice purchase. We have talked about it a couple of times, but I think NOV and SLB are similar in the sense that they are the perfect contenders to purchase during a turbulent oil period such as this one. You hit it spot on, in the long run, people will need to start drilling for oil again and when they do, who will they call? Probably the market leader in the supply industry.

    Their financials appear very strong, which will provide a nice cushion if oil prices remain lower during the year. Overall, great find and a welcome addition to the portfolio!

    Bert

  65. Jimmy,

    I actually just did a quick fundamental check on the valuation:

    http://dailytradealert.com/2015/02/08/undervalued-dividend-growth-stock-of-the-week-19/

    The consensus is that it’s an undervalued stock, though you have to be comfortable in tech. The licensing seems robust, but things can change faster in tech than in almost every other industry. I’m thinking of adding to my tech exposure and QCOM might make a good addition. I don’t want tech to represent much more than 2.5% of my portfolio over the long haul, which would likely be spread out over 3-4 companies to keep the risk low.

    QCOM’s patents are impressive. Looks like they’re covered across the spectrum for handsets. Though, the recent news coming from Samsung is a potential concern.

    Cheers!

  66. Andy,

    Better to start today than never, my friend. I got a late start as well, comparatively speaking. There are a number of other bloggers/investors in the community that are starting out in their early 20s. I wish I would have started that early, but the good news is that it’s definitely not too late. Get aggressive and you could potentially see FI just after turning 40. 🙂

    I like CAT, though I’m already exposed to DE. Somewhat similar business models with similar machinery, though I prefer DE’s angle on agriculture. I may own a chunk of CAT at some point as well. The recent slide has made it a lot more appealing. Gotta be careful with stocks like that as the businesses are heavily cyclical. The one thing I’m concerned about is CAT’s brand equity in Asian markets. I also would caution against building a portfolio around stocks like CAT (or DE) due to their cyclical nature and possibility of a protracted weakness in operations that could cause issues with paying the dividend.

    Stay in touch. I hope that helps.

    Best regards!

  67. I thought about buying some NOV, but then JNJ dropped below $100 today. Couldn’t resist buying more JNJ! 🙂

  68. The entire market has been overvalued for the past few years, making it tough to find good purchase entry points. Energy stocks are on sale. History has shown that oil does recover and when it does you will be very happy with NOV. I think this is an excellent purchase. I bought NOV last month, 30 shares at a cost basis on $61.85 per share. I was happy with that price and even happier now at $52.28. Looks like it is time for me to average down.

    Thanks for the great post Jason.

  69. Seraph,

    Nice job there. I was fortunate to load up on JNJ when I did, but I absolutely wouldn’t mind building a position right here, right now. Great company. One of the best over a very, very long time. Unlikely you’ll be unhappy with those shares. 🙂

    Cheers!

  70. DD,

    Great job averaging down. You just lowered your cost basis in a wonderful company. I’ve noticed that great companies are like springs when they start to drop like this. The further they fall, the more they wind up, and the more aggressively they come back. I’m in it with you and I think we’ll do well here. 🙂

    Cheers!

  71. I like NOV here as well, I really don’t expect oil to continue south the way many are expecting. I think we see a quick reversal much like we did in 2009. The dividend growth has been tremendous, it’ll be interesting to see the next increase considering tightening margins but the payout ratio is still quite small.

  72. Great article on NOV i have been buying for the past two weeks at 55, 53, 52, and 51. I think it is a great value at this price. I have also purchased CVX and TOT during this downturn CXV at 100 a week ago and TOT at 46, TOT doesn’t have as clean of a balance sheet as NOV and CVX but it produces a great dividend.

  73. insurance guy,

    I agree. I’m definitely interested to see what the next dividend growth will look like. I’d be happy with anything north of 10%. That’ll really say something about their shareholder friendliness, though I wouldn’t be completely opposed to something smaller if they really felt uncertain about the future of the industry. We’ll see what we get!

    Best regards.

  74. nickfitz,

    CVX at $100 seems pretty solid. That’s right about my cost basis, though I was able to secure that at more advantageous oil prices. It’ll be interesting to see how some of the supermajors hold up here.

    Nice job averaging down incrementally there on NOV. Anything’s possible, but I just can’t imagine we’ll be unhappy with buying NOV here when looking back on it 10 or so years from now. 🙂

    Glad to be a fellow shareholder!

    Best regards.

  75. Another great buy. I pulled the trigger on 20 more shares on Feb, 3rd. Didn’t quite get as low a price as you did, but in 10 years I still think I’ll be happy with a buy under $55.

  76. GG,

    Great move there. It all averages out. My first purchase in NOV was just above $70, so I was very happy to average down all the way here into the low $50s. I doubt I’ll be buying anymore unless it drops maybe another $10/share, but I haven’t come across anything that makes me believe that NOV’s dominance is going away anytime soon. We’ll see how it works out!

    Best regards.

  77. I like NOV too. The timing of buyback of shares the company started last year in Q3 is perfect! The 3 billion share buyback, which makes up 10%-15% of the company at current prices, creates so much value for the excisting shareholders. Averaging down on the stock is in my opinion not really necessary. I bought some American Railcar Industries (ARII)

  78. Bob,

    Indeed. Buybacks aren’t generally well-timed. Impossible for management to time things just like shareholders. Though, buybacks tend to be even worse because they occur a lot of times when companies are flush with cash, the economy is humming along, and the stock is expensive. This case is obviously much different. Couldn’t have come at a better time, in my opinion.

    Haven’t heard of ARII. I’ll have to take a look. Thanks for sharing!

    Best wishes.

  79. Just found your blog last month and have been enjoying catching up on your older articles.

    Question on NOV, they state that they spent $779 million retiring 11.6 million shares; however, the share count only dropped from 429 to 427 million shares. Does that concern you? It doesn’t seem like the share repurchase is actually resulting in much of a decrease in the total shares outstanding.

  80. eric,

    I’m not sure what you’re looking at.

    Shares outstanding at the end of Q3 2014 were 430,569,502:

    http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NTY1MTAzfENoaWxkSUQ9MjY0ODI5fFR5cGU9MQ==&t=1

    Shares outstanding at the end of Q4 2014 were 418,977,608:

    http://seekingalpha.com/pr/12388796-national-oilwell-varco-announces-fourth-quarter-and-full-year-2014-earnings

    Share repurchases don’t always add up to a 1:1 ratio like that, as it depends on a lot of factors. But it would seem you’re not looking at the correct financial statements. Be careful with that.

    Cheers!

  81. eric,

    That’s interesting. I’m not sure why there’d be a discrepancy there. I’d keep a lookout for the 10-Q, which should be available pretty shortly here. That should give the exact number of shares outstanding at the end of the quarter/year. Unless the numbers that SA was reporting are way off, it adds up.

    Cheers!

  82. In my opninion the story is as follows. NOV buys back their own shares. This can be seen on the statement of cashflows and the balance sheet. Cash goes out of the business and shares should be somewhere on the balance sheet. The oustanding shares won’t decline yet, they are stil the same. At the annual general meeting of shareholders the board of directors ask the shareholders for cancellation of the shares. That’s the point where the shares are not longer outstanding anymore (and are removed from the balance sheet) In other words: the shares are still outstanding until shareholder have voted for the cancellation after the AGM somewhere in April or May.

  83. Bob,

    That’s incorrect, as far as I’m aware and to the extent of my knowledge regarding share repurchases. Once stock is bought back by the company, the shares are either immediately cancelled or held as treasury stock. They don’t stay “in limbo” until a shareholders’ meeting. And I’ve never come across, in all my proxy and meeting dealings, a question regarding the cancellation of stock.

    Edit to add: This article by Investopedia does a good job explaining what happens to stock after a buyback, which is as I understand it.

    Best regards.

  84. Hi Jason, I think NOV is a good buy. Virtually every oil producing company has exposure with NOV. And since, like most oil related stocks, the stock has been trashed over the last few months I think this is a good place for money. I also think the quality oil producing stocks are good too. The price of good oil and gas stocks are having a 50% off sale!

  85. Nice average down Jason. I hadn’t been paying too close attention to the markets but I did look more at the energy sector because that’s my income source after all. I definitely noticed the big decline in NOV and will be looking to average down some because the opportunity is too good even with my somewhat limited capital currently. Investing in the energy sector, especially the E&P side, means you need to have a 3-5 year outlook. Every ~7 years there’s a big downturn in oil prices that leads to a big decline in drilling. NOV might not be the best investment you could make because the smaller E&P companies will see a bigger bounce when prices rebound, but good luck picking out the survivors in that bunch. NOV will be around for the next boom, and the next bust, and the next boom… Given the relatively steep declines in production in a lot of the shale plays it’ll be interesting to see what happens in 6 months or so with the price of oil. I’d be curious to find out what the back log of frac jobs are in the shale plays because that will probably be a leading indicator of oil price increases to come.

  86. Dannn,

    Be greedy when others are fearful, right? 🙂

    I don’t specifically aim to time high-quality stocks at rock-bottom prices, but I’ll take them when I can get them. We’ll see what happens with NOV, but I find it unlikely that someone would regret buying NOV anywhere between this price and the mid-$60s over the long haul.

    Gotta take advantages of those sales when they occur!

    Cheers.

  87. JC,

    Hey, good to see you, bud. Hope all is well with the Luke and the wife. 🙂

    I remember you mentioning how much you’d see NOV at the site. Always a good sign.

    But you’re right in that I’m more worried about the long term. I have no idea what’s going to happen with oil over the next six months or year, and so I have no idea what’s going to happen with NOV over that time frame either. But I’m fairly confident that NOV will be around 20 years from now and it would seem reasonable to assume that they’ll also be more profitable over that time frame. Like I mentioned, this could actually be a great thing for the business, as it allows them the opportunity to pick up some acquisitions on the cheap and also buy back shares on the cheap. We’ll see how it goes!

    Thanks for stopping by.

    Best regards.

  88. I followed some of your buys (NOV, WMT, V, IBM), but I have now decided that dividend-focused investing is not for me since I have so little capital (only about 20kEUR.) Investing just a few thousands will never generate enough dividends to be of any use. I sold NOV at a slight loss a couple of weeks ago and IBM yesterday (again a slight loss in USD but a nice gain in EUR), but WMT is looking good (+15% so far, in EUR though) and I plan to keep it until their next week’s announcement, which will hopefully boost their value so I can sell it too. I will greatly increase my risk (swapped IBM for ETFs in Vietnam, Africa and India, and will look to South America and maybe even Russia once I sell WMT) in the hope that in a few years I will have enough capital to return to dividend-focused investing. If I get 5 or 6 years at +20% a year I should be OK. I will continue to follow your progress though. Wish me luck! 🙂

  89. teppo42,

    I wish you the best of luck with your new strategy over there. Not what I would recommend, but there are many roads that lead to Rome. 🙂

    That said, having a large amount of capital isn’t necessary to succeed with this strategy. But I’m sure you’re doing what works best for you.

    Thanks for stopping by!

    Best regards.

  90. I fully agree with DM. Your strategy is not one I would necessarily follow and it’s true that dividend investing can be started for very, very little money. The key is to remain consistent and build over time and not chase elusive above average gains.

  91. How is a large capital not a requirement? I have at most 20 years left (if I’m lucky) when I might still be eligible to work and there is just no way I could build up enough capital with dividend stocks to be able to live off the dividends in 20 years’ time. At the very minimum you’d need a portfolio of a few million at that point to generate even modest amounts of dividends to live on. And the only way to get from 20k to millions in 20 years is to get unbelievably lucky dozens of times in a row. Or win the lottery, which is probably actually more likely. If I don’t manage either then I will not have any need for money at all so at that point I can just bet it all on a million-to-one chance…
    So how would investing in dividend stocks now with a capital of 20k€ save me from that fate?

  92. teppo42,

    “At the very minimum you’d need a portfolio of a few million at that point to generate even modest amounts of dividends to live on.”

    I disagree. $4 million would provide you approximately $140,000 per year to live off in today’s dollars at a 3.5% yield. Even more if you boost the yield. Inflation will erode some of that, but that’s certainly not “modest”.

    How much you need all depends on your lifestyle. Every dollar less you need improves your odds. But I’m not here to talk you into or out of anything. Rather, I’m just saying that a modest income and 20 years should be more than enough to provide a solid income with which one could live a very comfortable lifestyle on. I’m doing it on 12. Starting out with $20k and adding $24k/year for 20 years at an 8% return should net you somewhere around $1.25 million. That’s a decent chunk of change, but only you can determine what you want out of life.

    Cheers!

  93. Yeah, but the dollars in 20 years will not be buying anything close to what you get now. Everything will be at least ten times more expensive. And you should not assume a return of 3.5% when in all probability everything will be worse than the worst case you can imagine. Also, how could I add 24k a year when that is about all I net in a year? Could you live on zero dollars a year?

  94. teppo42,

    I’m not here to argue with you. Do what you feel is best for you. It’s exactly because of inflation that I’m investing the way I do, where the dividends grow above the rate of inflation. It’s wonderful to know that my purchasing power will only grow with time, inflation or not.

    If you don’t believe it’s possible, then it’s not possible. The battle is already lost. Nobody will believe in what you’re doing if you don’t.

    Good luck to you!

    Cheers.

  95. eric,

    You’re looking at the weighted average. That’s an average, not an exact number of shares outstanding at a specific date.

    Per page 1 of the same 10-K:

    “As of February 12, 2015, there were 409,935,076 shares of the Company’s common stock ($0.01 par value) outstanding.”

    Take care.

  96. thanks for the clarification. I am happy to see that I was wrong and that there was a meaningful decrease in the share count. I’m also happy to see they have continued to repurchase shares as the count has come down from 418,977,608 at the end of the 4th quarter. It’ll be interesting to see what they get it down to by the of the 1st quarter.

  97. Jason,

    I really enjoy your analysis. Your commitment to conversation within your blog is what keeps me coming back. Though as your community continues to grow, you will need to hire a 2nd jason. 🙂

    I’m curious as to what your thoughts are on the continued forecast of lower EPS surrounding NOV. I was using the below as a reference:
    http://www.nasdaq.com/symbol/nov/earnings-forecast

  98. Scubatoad,

    Ha! I’ll need to hire the future Jason that I’m saving and investing for. He owes me a few favors anyway. 🙂

    As far as those forecasts go, it’s nigh impossible to predict what NOV will be earning out to 2018. That’s just a complete guess. That said, the dividend is sustainable, even using the low end stuff. As I’ve mentioned quite a bit about NOV, the balance sheet should carry them through any short-term issues. Furthermore, even if they get hit hard, they wouldn’t be the only energy company with cash issues. Last I looked, quite a few energy majors weren’t even FCF positive. But this stuff is cyclical. You save the cash and build up the reserves when times are good so that you can do well when times are bad. Moreover, NOV’s been here many times before. Most recently was the big drop just a few years ago. I don’t see why “time time will be different”.

    Best regards.

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