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, 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.
