Here's a company with incredible potential for 2012. Analysts are saying: Buy Halliburton (HAL) now. There is a good reason for this. It looks well positioned to have a banner year in 2012.
Halliburton provides various products and services to the energy industry for the exploration, development, and production of oil and natural gas worldwide. It operates in two segments, Completion and Production, and Drilling and Evaluation. The Completion and Production segment offers production enhancement services, completion tools and services, cementing services. Boots & Coots well services is a subsidiary.
2011 was a hard year on HAL as it started to head south mid-summer, after peaking around $57. Since then, it has dropped by almost 40% and this is one of the reasons that it is worth taking a look. When stocks drop in value, good investors look at them and explore a time to re-enter the stock long term to grow with the company in value. Analysts see something in HAL as they have given it a strong buy recommendation. It has a great upside potential as its median range has been figured I at $52 and it is only trading presently at $33.94, so it has incredible potential.
With such upside potential, the largest obstacle is the political pressure and criticism connected to "fracking." If you are unfamiliar with this term:
The fracking process involves pumping millions of gallons of water, sand, and over 900 toxic chemicals thousands of feet underground to release tiny pockets of gas by literally breaking up the rock where the gas is trapped. Every time a gas well is fracked, 4 to 9 million gallons of water are injected into the ground. A single well can be fracked up to 12 separate times, adding up to over 100 million gallons of freshwater used in the lifetime of a well. (Frack Action)
It has been observed that many residences have become sick from dangerous levels of chemicals and methane gases in their water where fracking has occurred. Halliburton contended with this issue in the past and as an interested investor I would want to know if it will hinder its growth as a company in the future.
In response to the incredible outcry, HAL has created a new fracking fluid they called CleanStim. Unwilling to totally reveal the formula, they claim its ingredient come entirely from the food industry. In a brilliant marketing move, it was introduced by one of Halliburton's executives actually drinking the CleanStim.
It was at a keynote lunch in where Halliburton CEO Dave Lesar talked about the concerns in hydraulic fracturing. He spoke about how CleanStim is HAL's answer to the deep concerns people had about fracking and called up a "fellow executive" as he held a sample of the fracking fluid in his hand. The unnamed executive demonstrated how safe it was by drinking it, according to two attendees. This was brilliant! Considering the concerns about drinking water becoming undrinkable, what better way to grab the attention of the industry but by drinking the very thing they were concerned would pollute the water.
Now, not everyone is gung ho for CleanStim. It still has its skeptics. And it would have had a much greater, long lasting impact if Mr. Lesar drank it himself. Even with the skepticism, this should help HAL in its quest to grow and profit in this field, to say the least. Acquiring the ingredients from the food industry provides an extra margin of safety to people, animals and the environment in the unlikely occurrence of an incident at the well site.
Investing in Halliburton
Halliburton, on a chart appears to have formed a nice foundation at about 31.5. On a weekly chart, it still looks like a long term downward trend is still in place. The daily chart reveals a possible half-completed "Cup and Handle" reversal formation. The cup is in the shape of a "U" and the handle has a slight downward drift. The cups with longer and more "U" shaped bottoms tend to have a stronger reversal signal. HAL is in the fifth month of this "U" pattern and may be on the bullish part of it now. If this is the case, now is a good time for a long term investment in the stock.
Option Strategies
If HAL is on the rise, we like a series of vertical debit spreads as option plays because the options are reasonably priced and the strategy can bring home nice profits with limited risks. As an example, if an investor believes HAL is moving up, look at selling a call option around its first significant point of resistance. This is around 37. Going into February, sell a 2012 February 37 call (presently priced at $.68) and buy a February 38 call (presently priced at $.46). The risk is now only $.22 but offers significant rewards as HAL grows. This type of strategy can be played each month when it looks like HAL will move up.
Disclosure: I am long HAL.
Additional disclosure: Options, Basic Materials, Oil & Gas Equipment & Services
