In this article, via an analysis based on the latest available Q4 institutional 13-F filings, we identify the oilfield machinery/ equipment & field services companies that are being accumulated and those being distributed by the world's largest fund managers. A prior article that examined the investing activities of mega funds in the related oil & gas drilling services group can be accessed by clicking on the above hyperlink. Also, prior articles on the investing activities of mega funds in other groups in the energy sector, including oil & gas exploration and production companies can be accessed from our author page.
These mega managers, managing between $50 billion and over $700 billion in 13-F assets, control over 35% of the assets invested in the U.S. equity markets, but number just over 30 out of the tens of thousands of funds that invest in the U.S. equity markets. Taken together, they are bearish on the group, cutting a net $1.06 billion in Q4 to their $91.94 billion prior quarter holdings in the group.
The following are the oilfield machinery/ equipment & services that these mega fund managers are most bullish about, that are undervalued relative to the peers in their group (see Table):
Cameron Intl Corp. (NYSE:CAM): CAM manufactures oil and gas pressure control and separation equipment for production in onshore, offshore and subsea applications. A total of 29 mega funds hold 46.1% of the outstanding shares, with eighteen funds buying and ten selling during the quarter. Also, together mega funds added a net $352 million in Q4 to their $4.99 billion prior quarter position in the company. The top buyers were Wells Fargo & Co., with $137 billion in 13-F assets ($93 million), and diversified financial services provider Ameriprise Financial, with $131 billion in 13-F assets ($70 million), and the top holder was T Rowe Price Associates, with $288 billion in 13-F assets ($827 million).
CAM reported its Q1 (March) the week before last, on Thursday, with revenues coming in-line and missing analyst earnings estimates by a penny (54c v/s 55c), while also guiding down Q2 earnings and re-affirming FY 2012 EPS. While shares jumped higher by almost 8% in the days after the report, they have since given back all the gains and then some more, mirroring the declines across most of the energy group over the past week-and-a-half as crude oil supplies rose and price fell. CAM shares currently trade at 10-11 forward P/E and 2.4 P/B compared to averages of 11.7 and 2.4 for its peers in the oilfield machinery & equipment group.
C & J Energy Services (NYSE:CJES): CJES provides hydraulic fracturing and coiled tubing services, with a focus on complex, technically demanding well completions, to the large exploration and production companies with unconventional resource positions. A total of 19 mega funds hold 18.9% of the outstanding shares, with fourteen funds buying and three selling during the quarter. Also, together mega funds added a net $31 million in Q4 to their $146 million prior quarter position in the company. The top buyer was Ameriprise Financial ($12 million), and the top holders were mutual fund powerhouse Fidelity Investments ($31 million), Ameriprise Financial ($28 million), Wellington Management, with $254 billion in 13-F assets ($26 million), and Citigroup ($25 million).
At 5.6x current earnings and 2.4 P/B, CJES is probably the cheapest stock in the oil field services group, and even more so when considering its strong growth. In its latest Q4 (December), the company reported 156% revenue and 233% earnings growth year-over-year, and earnings are projected to continue growing from $3.28 in 2011 to $4.11 in 2013 at a 11.9% annual rate. In comparison, its peers in the oil field services group trade at an average 14.7 current P/E and 1.3 P/B. The stock has some but not excessive coverage in the analyst community (a positive), and of seven analyst that currently cover the company, five rate it at buy/strong buy, one at hold, and one at underperform, with a mean target of $26, well above current prices in the $18 range.
The following are some additional oilfield machinery/ equipment & field services companies that mega fund managers accumulated in Q4 (see Table):
- National Oilwell Varco (NYSE:NOV), engaged in the manufacture and sale of equipment, components and products used in oil and gas drilling and production, in which mega funds together added a net $134 million in Q4 to their $9.85 billion prior quarter position in the company; and
- TETRA Technologies Inc. (NYSE:TTI), that provides oilfield services including completion fluids, production testing, wellhead compression, and well plugging and abandonment, in which mega funds together added a net $12 million in Q4 to their $297 million prior quarter position in the company.
Besides these, mega fund managers based on their Q4 trading activity indicated that they are bearish on the following oilfield machinery/ equipment & field services companies:
- Halliburton Company (NYSE:HAL), that provides a variety of equipment, and maintenance, engineering and construction services to the oil and gas exploration and production (E&P) industry, including reservoir completion and drilling services, in which mega funds together cut a net $746 million in Q4 from their $10.90 billion prior quarter position;
- Schlumberger Ltd. (NYSE:SLB), a provider of technology services, project management and information solutions to the petroleum industry worldwide, in which mega funds together cut a net $405 million in Q4 from their $37.18 billion prior quarter position;
- Geneva, Switzerland-based Weatherford Intl Ltd (NYSE:WFT), a leading provider of equipment and services used in the drilling, evaluation, completion, production and intervention of oil and natural gas wells to independent oil and natural gas producing companies worldwide, in which mega funds together cut a net $86 million in Q4 from their $2.20 billion prior quarter position;
- Oceaneering International Inc. (NYSE:OII), that is one of the largest underwater services contractors, provides deepwater engineered services and products to the offshore oil & gas industry, in which mega funds together cut a net $65 million in Q4 from their $2.53 billion prior quarter position;
- Newpark Resources Inc. (NYSE:NR), that provides fluids management and oilfield environmental services in the U.S. and worldwide, in which mega funds together cut a net $12 million in Q4 from their $209 million prior quarter position; and
- RPC Inc. (NYSE:RES), that provides specialized oilfield technical and support services, and equipment, to oil & gas exploration and production companies in the U.S. and selected markets worldwide, in which mega funds together cut a net $1 million in Q4 from their $113 million prior quarter position.
Credit: Fundamental data in this article were based on SEC filings, Zacks Investment Research, Thomson Reuters and Briefing.com. The information and data is believed to be accurate, but no guarantees or representations are made.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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