Drill Baby Drill: A Rebound Story – National-Oilwell Varco, Inc. (NOV), Halliburton Company (HAL)

Year to date, Halliburton is up over 14%, Baker Hughes is up over 7%, and National Oilwell Varco is down over 5%. The major under-performance is unwarranted, especially with Goldman Sachs’ price target being set at $95 earlier this year. Usually an upgrade from a top firm like this one causes a spike in the stock. Halliburton and Baker Hughes should continue their runs up, with Halliburton being the top performer in the sector for the year. However, National Oilwell Varco is still the cheapest of the three, and for that matter they are the best buy right now.

Personally, I believe this stock will rise above $80 this year, based on 12.5 times this years’ earnings expectations. A 12.5 multiple is still incredibly cheap, but the stock is not loved by the market right now, so this is the discount I am forced to give. If the earnings report had been taken as a huge positive and a buying opportunity, as it should have, a fair multiple would be more along the lines of 15. I have initiated an outperform on all three of these companies in CAPS. Halliburton and Baker Hughes are BUYS and National Oilwell Varco is a STRONG BUY.

The article Drill Baby Drill: A Rebound Story originally appeared on Fool.com and is written by Joseph Solitro.

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