Should we Follow Tweedy Browne Into This Oilfield Service Stock? – Halliburton Company (HAL), Baker Hughes Incorporated (BHI), Schlumberger Limited.(SLB)

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Tweedy Browne, with more than $3.43 billion assets under management, is one of the most respected investment managers in the US. In the fourth quarter of 2012, it bought shares of Halliburton Company (NYSE:HAL), an oilfield service company. As of December 2012, it had more than 4.64 million shares in the company, accounting for 4.7% of its total portfolio. Let’s take a closer look to see whether or not we should follow Tweedy Browne into Halliburton.

Halliburton Company (NYSE:HAL)Business snapshot

Halliburton, founded in 1919, is the leading provider of oilfield services to major oil and gas companies globally, with two main business segments: Completion and Production segment, and Drilling and Evaluation segment. The company is considered the world’s biggest provider of hydraulic-fracturing services. In the past year, Halliburton has benefited from a fast growing demand in the pressure-pumping market in North America. Furthermore, in order to significantly reduce its carbon emission and safety concerns, the company has been offering customers a new kind of fracking fluid that uses only food-industry ingredients.

$17.38 billion, or 61% of total revenue, was generated from the Completion and Production segment, while the Drilling and Evaluation segment had around $11.12 billion in total revenue in 2012. The operating income of the Completion and Production segment was $3.14 billion, whereas Drilling and Evaluation generated nearly $1.68 billion in 2012 operating income. Halliburton Company (NYSE:HAL) maintained a diverse customer base as no single customers have accounted for more than 10% of its total consolidated revenue for the last 3 years.

A good growth company with a conservative balance sheet

Over the past five years, Halliburton has experienced decent growth in both its top line and bottom line. The revenue has increased from $18.28 billion in 2008 to $28.5 billion in 2012 while the EPS has risen from $1.70 to $2.84 in the same period. In addition, the operating cash flow has gone up consistently, from $2.67 billion to $3.65 billion. However, the free cash flow has fluctuated quite widely, in the range of $88 – $542 million. Investors might feel comfortable with the company’s conservative capital structure. As of December 2012, it had $15.67 billion in total stockholders’ equity, $2.48 billion in cash and only $4.8 billion in long-term debt.

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