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 Click to see monthly returns in table format!

Lists

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

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!