Steve Cohen Bought This Stock

SAC CAPITAL ADVISORSSAC Capital Advisors, which is managed by billionaire Steve Cohen, has filed a 13G with the SEC to declare that, as of October 2nd, its family of funds owned a total of 7.9 million shares of Superior Energy Services, Inc. (NYSE:SPN). This comes out to 5% of the company’s shares outstanding, thus triggering the public filing. Our database of 13F filings shows that SAC owned 1.1 million shares of the company at the beginning of the third quarter of the year, so the fund’s position represents a significant increase over the last three months (see more stock picks from billionaire Steve Cohen). Superior Energy Services, Inc. is a specialized equipment company serving oil and gas customers in areas such as drilling products and well enhancement, with most of its revenue coming from onshore operations.

Superior’s business has grown substantially from a year ago, but much of these gains have come from the acquisition and integration of Complete Production Services, a transaction which closed in the first quarter of 2012. Over the next five years, analyst estimates are for a 20% annual growth rate in EPS. This growth rate is impressive when considering that Superior trades at a trailing P/E of 8. Taking analyst expectations into account, the forward P/E is 7 and the five-year PEG ratio is 7. At a $3 billion market cap, the stock may be a bit under the radar for many investors to notice, but it will have to substantially disappoint the street- and see a drop in earnings- to even prove fairly valued. Given the level of drilling activity in North America, we would at least expect it to hold its business steady; this would imply that the stock could be a good value.

Other hedge funds have reported positions in Superior Energy Services, Inc. as well. At the end of the second quarter, Glenn Dubin’s Highbridge Capital Management owned 4.9 million shares of the company, giving it a stake worth about $100 million. Highbridge has a total of about $29 billion under management and the fund is majority owned by JPMorgan Chase (find more stocks that Highbridge has $100 million invested in). Nierenberg Investment Management increased the size of its position by 62% between April and June to a total of 1.2 million shares; Nierenberg is a small fund and only owns a few stocks, so its Superior holding was about 10% of its 13F portfolio (research other stocks Nierenberg liked).

We avoided companies focused on drilling in favor of companies which provide equipment (and, in some cases, services) to drillers and came up with a peer group consisting of Baker Hughes Incorporated (NYSE:BHI), RPC, Inc. (NYSE:RES), Oil States International, Inc. (NYSE:OIS), and Forum Energy Technologies Inc (NYSE:FET) to include at least one company which concentrates on offshore. These peers tend to trade higher than Superior on an earnings basis: RPC has the lowest trailing P/E of the lot at 9, with the rest clustering between 10 and 11. RPC’s future prospects don’t look particularly strong, with its earnings about flat last quarter compared to a year ago and a forward P/E multiple of 12. We think that we’d rather own Superior.

However, the other three peers all saw strong earnings growth in their most recent quarter versus the same period in the previous year, as would be expected given the boom in drilling activity in the U.S. Still, Baker Hughes and Forum trade at 11 times forward earnings estimates, meaning that their degree of outperformance would have to substantially trump Superior’s in order for those companies to be good values. It’s hard for us to see them as better values as well. Finally, Oil States International carries trailing and forward P/Es of 10 and 9, respectively, in addition to its strong recent growth. The company, which has a notable temporary accommodations business that is responsible for about half of its gross margin, could be another interesting way to play a continued high level of drilling activity.

We think SAC has made a good choice here. Superior looks cheap, including relative to its peers, and is in a good business. Oil States International also looks strong, and investors should pick through their mix of segments to determine which is more attractive.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Rito Pls Buff: The 10 Least Played Champions in LoL Season 4

10 Covers of Popular Songs that are Better than the Originals

Must See TV: The 9 Most Anticipated Shows of 2015

The 15 Biggest Box Office Bombs of All Time

10 Things The World Can’t Stand About Americans

Picture Perfect: The 6 Smartphones with the Best Cameras

The 10 Best Countries To Work In the World

A Profitable Day At The Track: 5 Tips For Betting On Horses

Tearing You Apart: 6 Bad Habits That Ruin Relationships

Learning on the Job: The 6 Biggest Mistakes Parents Make

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

Burger Kings: The 10 Most Expensive Burgers in the World

The 10 Most Ethnically Diverse Countries in the World

The 10 Most Exclusive Credit Cards in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!