Big Money's Betting That Oil Will Skyrocket

One of the great maxims of traders and Wall Street pros is to follow the "smart money."

I don't support the thesis that institutional shoppers tend to make smarter investing decisions, but many of you who've read my ruminations on insider buying say you'd also like to know how the Big Money is betting. Your wish is my command.

Next up: Schlumberger (NYSE: SLB  ) . Are institutions bullish or bearish when it comes to this oilfield services provider?

Foolish facts

Metric

Schlumberger

CAPS stars (out of 5) *****
Total ratings 2,785
Percent bulls 97.2%
Percent bears 2.8%
Bullish pitches 403 out of 419
Highest rated peers Seadrill Ltd., Divestco, Core Laboratories N.V.

Data current as of Jan. 21.

Macroeconomic forces may help to explain why Fools love Schlumberger. Rising oil prices could provide incentives for oil explorers to deploy rigs, which would create demand for services from companies like Schlumberger and Halliburton (NYSE: HAL  ) .

Demand could persist for years. For the first time in years, leaders of Europe's central bank are publicly contemplating moves to fight rising food and energy prices on the continent, according to reporting by The Wall Street Journal. Heavy consumption is at least one of the forces conspiring to keep oil prices high in Europe and around the world.

"Oil is headed back up. $100 per barrel oil will happen in 2011, and at that price this oil industry player will be making lots of money," wrote Foolish investor kpscott in December.

Institutional ownership history

Top Owners

2007*

2008*

2009*

Latest*

Capital Research and Management

100,677,700

65,005,000

70,866,499

76,829,040

BlackRock

10,997,457

11,116,125

64,543,094

74,923,490

State Street Global Advisors

38,236,523

44,819,968

44,435,813

51,557,954

Dodge & Cox

22,133,592

46,095,983

50,524,644

50,721,720

The Vanguard Group

35,456,075

38,589,673

41,977,755

50,644,096

TOP 25 TOTAL

478,032,822

463,949,267

545,778,707

621,089,378

Source: Capital IQ, a division of Standard & Poor's.
*Indicates the number of shares owned.

Big Money investors appear to agree with that thesis. Following a dip during the Great Recession of 2008, institutions have been steadily accumulating shares of Schlumberger. BlackRock and Vanguard, in particular, have been big buyers over the past year.

Their gamble's paid off. Schlumberger is up roughly 28% over the past year, a solid market-beater. Can the rally continue? Foolish colleague Bryan White thinks so.

"Schlumberger is the most leveraged major services company to exploration, international growth, and the difficult deepwater and unconventional plays. All these areas of expertise make it a solid pick as we head into 2011 and beyond," Bryan wrote in announcing Schlumberger's entry into the Fool's Rising Stars portfolio.

Competitor and peer checkup

Company

Institutional Ownership

Insider Ownership

Allis-Chalmers Energy (NYSE: ALY  ) 33.06% 6.19%
Halliburton Company 80.87% 0.30%
National Oilwell Varco (NYSE: NOV  ) 88.42% 0.25%
Newpark Resources (NYSE: NR  ) 100.71% 1.29%
Schlumberger 77.39% 0.21%
TETRA Technologies (NYSE: TTI  ) 96.32% 2.91%
W.W. Grainger (NYSE: GWW  ) 76.35% 13.70%

Source: Capital IQ. Data current as of Jan. 21.

Judging only by this table, I'd say that Allis-Chambers Energy and W.W. Grainger have the best ownership profiles. But Schlumberger's own makeup is hardly bad. Institutions own less than 80% of the shares outstanding, which means there's room for more Big Money buyers of the stock.

Insiders may not own much, but that's also understandable. Schlumberger has been around since before the Great Depression. The company's founders are long gone. Fortunately, its growth opportunity appears to be just beginning.

As Bryan points out, Schlumberger is the market leader and unmatched by small competitors in terms of global reach. That should help tremendously if explorers take to far seas and sands in search of new oil and gas patches to tap.

Do you agree? Disagree? Let us know what you think about Schlumberger using the comments box below. You can also recommend other stocks for me to evaluate by sending me an email, or replying to me on Twitter.

What will be this year's top stock? We've got a good idea. The Motley Fool has created a brand new free report called "The Motley Fool's Top Stock for 2011." In it, we reveal the little company set to profit from the broadband Internet expansion. Get instant access by clicking here -- it's free.

Interested in more info on the stocks mentioned in this story? Add Allis-Chalmers Energy, Halliburton, National Oilwell Varco, Newpark Resources, Schlumberger, TETRA Technologies, or W.W. Grainger to your watchlist.

BlackRock is a Motley Fool Inside Value pick. National Oilwell Varco is a Motley Fool Stock Advisor selection. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool is also on Twitter as @TheMotleyFool. Its disclosure policy is smarter than the average bear.


Read/Post Comments (2) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 26, 2011, at 4:24 PM, writekelly wrote:

    Newpark Resources with MORE than 100% institutional ownership. I might invest in the company just for theiir innovations in math.

  • Report this Comment On January 28, 2011, at 5:43 AM, TMFMileHigh wrote:

    @writekelly,

    Thanks for writing.

    >> I might invest in the company just for theiir innovations in math.

    Well said. Believe it or not, this is possible because of how shares are borrowed for shorting, and Newpark has 6% of its outstanding shares sold short as of this writing.

    Foolish best,

    Tim (TMFMileHigh and @milehighfool on Twitter)

Add your comment.

DocumentId: 1427597, ~/Articles/ArticleHandler.aspx, 4/16/2014 7:25:10 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement