Every week Barron's puts out a weekly periodical that is well read within the industry. Companies receiving positive profiles tend to jump in the early part of the next trading week. This week a couple of attractive long term plays were highlighted positively in this weekend's magazine and could have positive starts to the week in trading Monday.
- National Oilwell Varco holds a dominant position in some key offshore drilling gear areas.
- The aftermarket and replacement market should be strong over the next few years for fast aging drill fleets.
- The company is global with 1,200 locations in over 60 countries. It also does its own manufacturing which gives it an advantage over competitors.
- More than half the world's jack up fleet is over 30 years old and approaching retirement age which will act as a tailwind for demand in the years ahead.
- Finally, the company plans to spin off its distribution business which will reduce conflicts of interest and drive growth.
Revenues are tracking to a 12% gain this in FY2013 and the consensus calls for another 8% to 10% increase in FY2014. After falling less than 10% this year, earnings are set to get back on track in FY2014 with over a 15% year over year gain in the New Year. The company has a strong balance sheet and the stock pays a 1.3% dividend. The 28 analysts that cover the stock have a $93.50 a share on NOV, more than 20% above the current stock price.
Fiat S.P.A (FIATY) - The Italian automaker comes in for very favorable treatment in this week's magazine. Barron's believes the shares could double over the next few years, which is not so farfetched given the shares trading above those levels in early 2011.
The magazine is particularly high on the company for its integration of its Chrysler acquisition. It recently bought the rest of the American carmaker on favorable terms. It believes the combination will result in significant economies of scale. This should result in lower financing costs for the overall enterprise, a significant improvement in cash flow and even a possible listing on the New York Stock Exchange.
The biggest challenge for Fiat is the European market which is at the same low ebb where our car market was back in 2009. However, European car sales have actually started to increase in each of the last three months. The combined company should benefit greatly as Europe continues to slowly improve. Fiat, which also owns Maserati & Ferrari, has 37 new launches worldwide over the next three years. For investors looking to take a chance on a turnaround in Europe, Fiat could be your vehicle.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in FIATY over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.