Transocean LTD (RIG), Hess Corp. (HES), Oil States International, Inc. (OIS): Is It Too Late to Get in on These Energy Names?

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Barry Rosenstein and David Einhorn check-in at Oil States

Barry Rosenstein was the first hedge fund manager to alert the investment community about Oil States International, Inc. (NYSE:OIS). David Einhorn followed up at the Ira Sohn Value Conference that he liked the stock as well. The hidden gem in Oil States International, Inc. (NYSE:OIS)’ portfolio is its attractive accommodations business. The company provides housing to oilfield workers. Rosenstein and Einhorn want the accommodations business spun-off into a REIT and separated from its oilfield-services businesses.

Barry Rosenstein’s JANA Partners is the largest shareholder in Oil States International, Inc. (NYSE:OIS) with a 9.1% stake. David Einhorn’s Greenlight Capital owns just under 5% of the company worth $220 million. News of JANA’s stake has been the cause of the company’s recent run-up in price. The stock was trading at around $75 prior to the disclosure of the 9.1% stake in April.

Due to the recent increase in price, it’s tough to initiate a new position around $100. The company is still attractive trading at a forward P/E of 12.8 and a PEG ratio of approximately 0.9. Expectations are baked into the stock price that the accommodations business will be spun-off. How much more upside remaining in the near-term remains to be seen. A dip into the low $90s would be a better entry point.

Foolish assessment

All three companies have been shaken up by these activist hedge fund managers. They have benefited existing shareholders by forcing management changes and increasing share prices. I see further upside for Transocean LTD (NYSE:RIG) and Hess Corp. (NYSE:HES) shares and see Oil States International, Inc. (NYSE:OIS)’ shares as a hold. The move in Oil States International, Inc. (NYSE:OIS) has happened too fast and the majority of the gains in the stock have already occurred.

The article Is It Too Late to Get in on These Energy Names? originally appeared on and is written by Mark Yagalla.

Mark Yagalla has no position in any stocks mentioned. The Motley Fool owns shares of Transocean. Mark is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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