Is Schlumberger Limited (SLB) A Smart Long-Term Buy?

Artisan Partners Limited Partnership, a high value-added investment management firm, published its ‘Artisan Value Fund’ fourth quarter 2020 investor letter – a copy of which can be downloaded here. A return of 20% was recorded by its Investor Class: ARTLX, 20.05% by its Advisor Class: APDLX, and 20.07% by its Institutional Class: APHLX, in the fourth quarter of 2020, all outperformed its Russell 1000 Value Benchmark that delivered a 16.25% return and its Russel 1000 Index that was up by 13.69% in the same period. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

Artisan Value Fund, in their Q4 2020 investor letter, mentioned Schlumberger Limited (NYSE: SLB) and emphasized their views on the company. Schlumberger Limited is a Houston, Texas-based oilfield services company that currently has a $38.2 billion market capitalization. Since the beginning of the year, SLB delivered a 25.06% return, impressively extending its 12-month gains to 91.18%. As of March 18, 2021, the stock closed at $27.25 per share.

Here is what Artisan Value Fund has to say about Schlumberger Limited in their Q4 2020 investor letter:

“New purchases include Schlumberger. Schlumberger, which is a global provider of a range of services to the oil and gas industry, was a new purchase in Q4 as well as a top detractor. We’ve noted in the past how it is not uncommon for low expectation situations to experience widening discounts as we enter and build our position. It’s often a feature of our process, though it may appear as a bug in standard performance attribution analysis. As the world’s largest oil services company, Schlumberger is working to adapt to 2020’s oil-price shock, in part, by reducing fixed costs and creating a differentiated and digitally focused way to more effectively manage the oil drilling process. Despite a terrible operating environment, Schlumberger still generates positive free cash flow, even in the worst of times. We maintain our belief that Schlumberger has the necessary tools to help transform its cost base and by extension allow it to offset industry deflation resulting from secular headwinds.”

Our calculations show that Schlumberger Limited (NYSE: SLB) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the fourth quarter of 2020, Schlumberger Limited was in 50 hedge fund portfolios, compared to 53 funds in the third quarter. SLB delivered a 22.37% return in the past 3 months.