An 11 O'Clock Stock Revisited: Tidewater

This article is part of our Rising Star Portfolios series. Click here to follow Jason on Twitter.

Last week got me thinking more about market volatility and how energy has been taking a good hit lately. GulfMark Offshore (NYSE: GLF  ) , for example, is still performing well in my Rising Star portfolio, but it has definitely taken a haircut.

Not long ago (OK, well in reality it was almost a year ago) I picked a similar company, Tidewater (NYSE: TDW  ) as my 11 O'Clock Stock, a feature we ran on Fool.com where a collection of Fools bought 50 stocks in 50 days. So I felt it was about time to take a look and see how my stock has fared to date.

Let's review
You can click here to check out my original recommendation; and click here to see the entire 11 O'Clock Stock scorecard. Overall, I'm impressed with how the whole portfolio has fared considering what the past year has brought us; total positive returns are always nice.

Tidewater was recommended on Sept. 2 and purchased at a price of $41.66. As of market close on Friday, it stood at $51.39 with a 52-week range of $38.71-$63.55 and a gain of 23.4%. The S&P closed at 1193.57 on Sept. 2 and 1178.81 on Friday for a loss of 1.24%, which means that Tidewater is beating the market by 24.6%.

Is this thing a keeper?
With a year's time coming up next month, is Tidewater still worth holding onto? My answer is: absolutely. It's still only trading at around 1.2 times tangible book value, and even as activity in the Gulf is slow to come back, I noted in the initial recommendation that at the time about 82% of all revenue came from the company's international segment, which doesn't include the Gulf.

CEO Dean Taylor acknowledges today that the company's future is in the international segment. He also believes the sector has reached the bottom of a cycle and that, going forward, ships are going to command higher day rates. And day rates are going up, which is a good sign.

The company has 373 vessels under management with 262 currently in active service, slightly lower than the same quarter a year ago. While management noted that adding new vessels to the fleet will probably drag on earnings for a quarter or two, the company's investing for the future while the getting is cheap. As activity starts ticking back up, Tidewater should be in excellent shape to put more, newer vessels to work.

I think it's quite reasonable to believe that in another year this stock will be worth considerably more than it is today. The current tangible book value stands at $42.89 per share on the balance sheet. Tack that onto a 1.8 multiple (in line with the approximate 10-year average of close to two) and shares could be worth around $77.

There are always risks involved
One risk I mentioned in the initial write-up was in regard to stacked vessels, and at the end of the June quarter last year, that number stood at 89 vessels. As of June 30 of this year, that number stood at 98 vessels. Again, stacked vessels are part of doing business, and this is something to keep an eye on over time. On a percentage basis, the number of stacked vessels this quarter isn't far off with last year's number, so I don't see anything to be concerned about at this point.

Tidewater also competes with companies like Seacor (NYSE: CKH  ) and Hornbeck (NYSE: HOS  ) , so I thought it would be worth seeing how these companies have performed over the same period of time. As you can see from the results below, it was a great time to get into energy period as all four are beating the S&P loss of -1.24% to date (gains noted below are absolute gains, not in relation to the market):

Company

Closing Price 9/2/2010

Closing Price 9/2/2011

Gain/(Loss)

Seacor $81.15 $90.45 11.5%
Hornbeck $16.13 $23.11 43.3%
GulfMark Offshore $28.18 $36.68 30.2%
Tidewater $41.71 $51.39 23.2%

It's 11 o'clock; do you know where your stock is?
With Tidewater, we got a good company at what I considered to be a great price when we added it to the 11 O'Clock Stock portfolio. The oil spill in the Gulf of Mexico took down a lot of companies that had more or less nothing to do with it. Today, the Gulf accounts for about 6% of Tidewater's overall business, so even if activity there continues to remain slow, Tidewater should only feel minimal pain. Given its global reach and oil's finite supply, I think Tidewater is a keeper.

This article is part of our Rising Star Portfolios series, where we give some of our most promising stock analysts cold, hard cash to manage on the Fool's behalf. We'd like you to track our performance and benefit from these real-money, real-time free stock picks. Click here to see all of our Rising Star analysts (and their portfolios).

Stock Advisor analyst Jason Moser owns no shares of any companies mentioned. The Motley Fool owns shares of Tidewater and Gulfmark Offshore. Try any of our Foolish newsletter services free for 30 days. 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 has a disclosure policy.


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