In the following video, Fool analysts Austin Smith and Jim Mueller discuss some of the risks facing National Oilwell Varco.
Although NOV is among the safest bets in the energy industry, it isn't without its risks, and investors should know what those are. Jim has identified three:
- Parts failure: When parts fail on an oil rig, as a blowout preventer did in the BP spill, that could lead to both financial and reputational damage to the maker. NOV was not the maker in that case but faces the risk nonetheless.
- Losing a big customer: NOV had one customer that provided about 12% of its revenue in 2011. Investors want to see a company like NOV with a diverse customer base.
- Oversupply: If drillers become too aggressive in building out their fleets too fast, orders for NOV could start to dry up, since fewer of its products would be needed.
Despite these risks, National Oilwell Varco remains 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 as well as updating an aging fleet of offshore rigs. To help determine if NOV is a nice fit for your portfolio, check out our premium research report with in-depth analysis on whether NOV is a buy today. For instant access to this valuable investor's resource, simply click here now and claim your copy.