National-Oilwell Varco, Inc - Drilling For Profits?

A former work colleague and I still exchange emails about the latest[]{.push-double} [“]{.pull-double}hot stock tip.” He’s a relatively new trader and I’ve been trying to coach him on the importance of stops, position sizing, money management, etc. He recently asked me what I think about National-Oilwell Varco, Inc ([NOV]{.small-caps}) because he’s trying to day/position trade it.

First, let’s see what they do:

National Oilwell Varco, Inc. ([NOV]{.small-caps}) is a worldwide provider of equipment and components used in oil and gas drilling and production operations, oilfield services, and supply chain integration services to the upstream oil and gas industry. The Company operates in three segments: Rig Technology, Petroleum Services & Supplies, and Distribution Services. The Rig Technology segment designs, manufactures, sells and services complete systems for the drilling, completion and servicing of oil and gas wells.

I particularly like oil drillers, suppliers, and anything oil related these days. I keep thinking about India and China when I go long these types of companies, so [NOV]{.small-caps} passes on this test.

[Technical Evaluation]{.underline}

[NOV]{.small-caps}[]{.push-single}[’]{.pull-single}s chart gives me pause though, it looks like the recent uptrend is broken for now.

[NOV-111607[NOV-111607]{.caption}]( "NOV-111607")

[NOV]{.small-caps} is a classic breakout stock that has had an amazing run this year but last week’s selloff, and subsequent break of the trendline, would make me very cautious going forward.


[NOV]{.small-caps} is rated as 3 Stars in the S&P Stock Report, it has a [PE]{.small-caps} ratio of 19.04 (high for me), forward [PE]{.small-caps} of 14.13, and [EPS]{.small-caps} of \$3.32, it’s outperformed its peers by +110.3%, and has no dividends. Overall the Fundamentals are good but not inspiring enough for me to enter a position. I do like the fact that [EPS]{.small-caps} are relatively healthy but current estimates show its growth as slowing for next year.

The end result? No thanks! I would like this stock very much for my long term portfolio but not right now, maybe when the price comes down more.

Disclosure: No positions.

Show Comments