Hess Corporation (HES) has not been the best performer in my portfolio since I first purchased and wrote about it in March when it was trading at just under $65 a share. I have used the weakness in the shares to average down, and now have an average cost of around $55 a share as I have not wavered from the company's value story. As they say, every dog has its day, and HES has picked up several positive catalysts in the last few weeks. The stock is performing much better technically, and it even received a shout out from the Mad Maestro of Mad Money yesterday. I believe it is in the early stages of a significant move higher.
Recent positives for Hess Corporation:
- Cramer highlighted the company Monday on Mad Money. He stated the company was worth way more than the sum of its parts. Cramer believes the company's refinery assets are worth $6/share, and its Bakken Assets should be valued at least $25/share based on recent sales in the region. He also stated that the company's international assets should be assigned the following values: West Africa ($11/share), Asia ($17/share) and Europe ($8/share). So in total, by the Mad Maestro's reckoning, the company should be worth at least $67 a share.
- Supporting this thesis, the company recently sold a very small position in some Asian oil fields for $1B.
- Some investor and/or institution believes the company's value story, as a huge block of call options were bought yesterday.
- The stock also crossed over its 200 day moving average yesterday.
"Hess Corporation operates as an integrated energy company." (Business description from Yahoo Finance)
4 reasons HES is still is undervalued at just over $54 a share:
- The consensus estimates for FY2012 and FY2013 have begun to move up in the last month after falling for months.
- The stock is selling at just 8.5 times forward earnings, a discount to its five year average (17.2).
- The mean analysts' price target by the 14 analysts that cover the stock is just under $65.
- The stock is cheap at just 90% of book value and 5 times operating cash flow. Insiders have been net buyers of the stock in 2012 as well.