Atwood Oceanics: Fundamentally Solid with Relative Strength

Jun.26.09 | About: Atwood Oceanics (ATW)

While looking through the stock picks from my quantitative ranking systems, I came across Atwood Oceanics (NYSE:ATW). Atwood Oceanics is a small cap offshore drilling services company which owns a small rig fleet.

Looking at this page it is hardly surprising that Atwood Oceanics receives high marks from my rankings system. It scores better than average on valuation and growth, and also has a solid balance sheet and high margins.

There are also several other reasons to consider owning some of this company.

  • Institutional investors have picked up over 4.5 million shares in the past three months. Considering there are 64 million shares outstanding, they have bought over 6% in the last three months. If they continue buying they may very well cause the share price to rise.
  • Atwood Oceanics scores well on relative strength. Shares have risen around 75% in the last half year. Since outperformance is to some degree predictive of future returns this is not a fact to overlook.
  • Earnings and sales have consistently beaten estimates over the past year. Considering this history, current estimates may actually be too low.
  • The potential inflationary consequences of the current monetary policy could cause the price of oil to rise. Atwood Oceanics is an energy company and its share price has a correlation to the price of oil.

In short, Atwood Oceanics is a good company with potential for strong price appreciation. Because many fundamentals are working in its favor, shares of this company could hit $40 during 2010.

Disclosure: No Position