Ensco (NYSE:ESV) and Schlumberger (NYSE:SLB) represent two oil / gas plays that could skyrocket as the price of oil continues to rise. Meanwhile, Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG) are two technology picks that are very much in vogue right now. Coca-Cola (NYSE:KO) is a more traditional idea. Let’s see what’s been happening with these 5 stocks:
Google Inc. (GOOG) has been up and down lately, and investors are closely following some legal actions that are being taken in India. In fact, the Indian government is trying to get companies like Google, Facebook, Twitter, and Yahoo (NASDAQ:YHOO) to remove offensive content. Needless to say, that’s a nearly impossible task, but these companies will try to handle the situation delicately in order to preserve their share of India’s 1.2 billion-strong market.
Other news for Google comes in the form of a new deal with Mozilla. Google will pay Mozilla $300 million per year in order to keep its position as the Firefox browser’s default search engine. Apparently, that price got jacked up because of offers from Microsoft (NASDAQ:MSFT) and Yahoo for their respective search engines.
Another piece of exciting news for Google is how companies are using some of its data. As reported in this New York Times article, Procter & Gamble (NYSE:PG) will use Google search data to determine which areas of the United States are the most flu-prone. Then, smartphone users who fit certain demographics will receive ads for Vicks’ new Behind Ear Thermometer. That’s marketing at its finest, so don’t be surprised if Google can leverage its other data to big companies looking to get an edge.
Ensco plc (ESV) has been rising, but it wasn’t too long ago that Forbes reported that the company was trading below book value. When something like that happens, it’s a good idea to take a closer look and see if a company is selling for less than its worth. In fact, at least one analyst recently increased his earnings estimates for Ensco, as the company stands to benefit from signing an increased number of deals. Not only does the re-opening of the Gulf for drilling help Ensco, but also higher oil prices suggest that Ensco will make more money for each contract it signs.
As seen here, Ensco is also a favorite of the investors at The Motley Fool. With strong growth ahead of it and a solid financial position, this company could be the premier choice amongst oil & gas drillers. Other possible choices include Diamond Offshore Drilling (NYSE:DO) and Nabors Industries (NYSE:NBR). Ensco has the highest price/earnings to growth, price to earnings, and price to sales ratios out of those companies, but the premium may be worth it. Margins for the company fall in the middle of Diamond and Nabors – those numbers for Ensco are 48.74% gross and 28.59% operating.
The Coca-Cola Company (KO) has been up a bit the past few days, and the company remains committed to helping out the community of Atlanta. Here’s what Saunders Jones of The Coca-Cola Foundation had to say about some recent donations: “We want to do our part during the holiday season to help our local community thrive. These grants will support the efforts of three outstanding organizations that do the heavy lifting every day to reduce hunger in our community.”
On the business side of things, Coca-Cola and Pepsico (NYSE:PEP) are working hard to make all of its bottles out of plant-based plastic. The issue is that the carbonated beverages these companies are notorious for put quite a bit of pressure on the bottles themselves. Regardless, the new bottles will certainly be better for the environment, and they may even cost less than the materials that Coca-Cola and Pepsico currently use.
Meanwhile, at least one calculation of Coca-Cola’s intrinsic value indicates that the stock is extremely undervalued at the moment. That article is certainly worth taking a look at, although the discount rate used may be a bit too generous. Investors should also consider Dr Pepper Snapple (NYSE:DPS) stock, which has much lower price/earnings to growth and price to sales ratios than Coca-Cola.
Schlumberger Limited (SLB) has been a bit flatly lately, but the stock is receiving rave reviews regardless. After all, the company is dominant both technologically and geographically. While the technology revolves around a process known as fracking (hydraulic fracturing), the company is geographically diversified, having large operations everywhere from Brazil to Saudi Arabia. The company’s excellent management and investor relations are also two factors worth considering.
On the other hand, many people are concerned about that companies like Schlumberger are harming the environment. Described here, fracking may be causing a number of perverse environmental effects, including chemical leaks and even seismic activity. While closer regulation may be able to stop the chemical leaks, it remains to be seen how the seismic activity can be corrected for.
Important competitors for Schlumberger include Baker Hughes (NYSE:BHI), Halliburton (NYSE:HAL), and Weatherford (NYSE:WFT). Schlumberger has the highest price/earnings to growth and price to sales ratios, while price to earnings ratio is closer to the industry average. Gross margin of 21.29% and operating margin of 16.47% are also near the industry average. As for cash flows, $1.147 billion came in during 2010, while $32 million flowed out during the first 9 months of 2011. Capital expenditures were the biggest reason for the cash flow reversal.
Apple Inc. (AAPL) is on an upward trend, and investors are looking forward to the company’s next generation of hardware. While the iPad 3 and iPhone 5 are definitely on the horizon, it appears that a 7-inch tablet isn’t in the works. Keep in mind that Amazon (NASDAQ:AMZN) and Barnes & Noble (NYSE:BKS) have had tremendous success with their 7-inch Kindle Fire and Nook, respectively. In fact, sources say that Steve Jobs was very much against the idea of a 7-inch tablet, feeling that a small iPhone and a big iPad would better meet the needs of users.
In other news, some matters in the so-called “patent wars” have been resolved. While the U.S. International Trade Commission agreed with Apple about two of its claims, other legal actions, including some made in Germany, appear to be on their way to dismissal. Regardless, the iPhone remains a tremendously valuable asset for Apple. Consider reading this article, which explains how Apple gets service providers like Verizon (NYSE:VZ), AT&T (NYSE:T), and Sprint Nextel (NYSE:S) to pay for much of the iPhone’s shelf price. Indeed, those service providers are essentially subsidizing the iPhone’s non-contract price of $649, which partly explains why Apple’s margins are so high.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.