In the following video, Fool analysts Jim Mueller and Austin Smith talk about what investors in National Oilwell Varco should be looking for.
With companies like NOV, which has very broad exposure to the energy sector, it can be difficult for investors to know what they should focus on. Jim, however, sees three key areas for NOV.
The first is the price of oil. As oil prices rise, the Big Oil companies want to drill more wells, increasing business for NOV. But when prices fall, the opposite happens and demand for NOV's products shrinks.
The second is NOV's backlog. Right now, NOV has a backlog of orders to execute worth about one year's revenue. Investors want to see that backlog growing or holding steady.
The last area is growth in non-fossil-fuel energy. Fossil fuels are not environmentally friendly, and the move toward wind, solar, and electric vehicles will cut into the demand for oil long-term
Although it has its risks, National Oilwell Varco is perhaps the safest investment in the energy sector because of its industry-leading 60% market share. This company is poised to profit in a big way; its customers are both increasing the number of new drilling rigs and updating an aging fleet of offshore rigs. To help determine whether NOV is a nice fit for your portfolio, check out our premium research report with in-depth analysis on whether it's a buy today. For instant access to this valuable investor's resource, simply click here now and claim your copy today.