Drilling For Contrarian Value In Oil And Gas: Consider Oceaneering
- Anything related to Oil & Gas has declined substantially over the last 3 months in a period when the S&P has been flat. There has to be value here somewhere.
- Started my search with those worst hit: offshore drillers. Came away from research on RIG disheartened. Next step was to look down the industry supply chain for an indirect play.
- Enter OII: manufactures ROVs and provides a range of support services to offshore drilling industry.
- A high quality company: strong management and governance, significant competitive advantages, a record of very profitable growth, and generally good prospects.
- The stock looks undervalued at 8x EBITDA. I see upside of 30% to $85. Considering the opportunity costs of my book, though, I am looking for a bit more value.