There's a lot to like about Seadrill (NYSE:SDRL); but, in this video, Jim Mueller gives us three things to watch for as warnings signs to sell. First, Seadrill is expanding its rig fleet rapidly and incurring significant debt doing so. Second, utilization rates need to at least stay level, and preferably increase. If rates start to decrease, this could be trouble for the company. Third, Seadrill is ordering new rigs without a guarantee that they will be used once the rigs are built. If oil prices drop or demand for deep rigs declines, Seadrill could be in for a rough time, and investors should seriously consider selling.
Austin Smith owns shares of Seadrill. Jim Mueller owns shares of BP p.l.c. (ADR) and Seadrill. The Motley Fool recommends Seadrill. The Motley Fool owns shares of Seadrill. 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.