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apeterson8809
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I am an Investment Advisor Representative based in Indiana. I grew up in Lincoln, Nebraska. I graduated with a degree in Economics from Nebraska Wesleyan Univserity. During my collegiate years I was an active contributor to Wesleyan's Investment Group. I briefly interned for a management firm... More
  • Two Undervalued Stocks In An Oversold Sector 0 comments
    Apr 3, 2012 12:29 PM | about stocks: BTU, SLB

    BTU, Peabody Energy Corp, has been beaten to a bloody pulp, along with the rest of the energy sector. I do think this is a sector that is oversold; so it is time to find the cheapest undervalued stocks to consider buying.

    Book Value; in 2010, BTU was trading roughly 2.9x BV. In 2011, BTU was trading 3.5x BV. Currently, BTU is trading 1.4x its book value.

    Dividend Yield, 1.16%

    Earnings; BTU beat earnings expectations 9 out of the last 10 quarters, the 10th (Q4 2011), being a surprise miss. Earnings estimates for 2012 have been lowered from 3.76 in 2011 to 2.85 for 2012. In my opinion, this is due to stagnant global growth & decreased demand for coal in the U.S. Furthermore, I believe all of these bearish catalysts have been over priced into BTU.

    Fair value estimation; discounted future earnings + book value (I used BTU's 5 year annualized EPS growth estimate & a discount rate of 11%).

    BTU Fair Value Estimate = $65.00 / Share, +126% Upside

    SLB Long-Term Valuation = $95.00 / Share

    SLB, Schulmberger, has also declined with the energy sector, creating a great buying opportunity.

    Book Value; $22.97/share (Trading 3x Book) (Which is far lower than '10 & '11)

    Dividend Yield, 1.57%

    Fair value estimation (Using the same model as I used for BTU)

    SLB Fair Value Estimate = $109/Share, +56% Upside

    SLB Long-Term Valuation = $221/Share

    *Data gathered from Morningstar.com

    Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in BTU over the next 72 hours.

    Themes: Investing Ideas Stocks: BTU, SLB
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