Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of Baker Hughes, a GE Company Dropped 14.5% in November

By John Bromels – Dec 12, 2018 at 10:59PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Oil prices were one top reason, but there may have been another cause for the company's underperformance.

What happened

Shares of oil-field services company Baker Hughes, a GE Company (BKR 2.24%) fell 14.5% in November, according to data provided by S&P Global Market Intelligence

This was slightly worse than the oil-field services industry as a whole, as measured by the SPDR Oil & Gas Equipment & Services ETF, which was down 12.7% for the month. It was also worse than the company's industry peers, Schlumberger and Halliburton. Schlumberger shares dropped 12.1% for the month, while Halliburton's were down only 9.4%. 

A man's glasses fly off his face as a fist hits him on the side of the head.

Oil and gas services company Baker Hughes took it on the chin in November. Image source: Getty Images.

So what

The cause of the industry's woes was -- what else? -- a drop in oil prices. Brent crude prices tumbled 22.9% to finish the month at $57.71 per barrel, while WTI crude logged a similar 22.2% drop, ending the month at $50.78 per barrel. The drop in prices caused a widespread sell-off across oil-related industries, and oil-field services wasn't immune. 

However, it's noteworthy that Baker Hughes was hit a bit harder than other oil-field services companies. Looking at its performance for the month, the week of Nov. 5 was surprisingly tough for Baker. I say "surprisingly" because oil prices were actually relatively stable that week, and Schlumberger and Halliburton only registered drops that week in the 4%-to-5% range, compared with the 12% loss for Baker Hughes.

But another company had a particularly rough week that week: General Electric, which owns a 62.5% stake in Baker Hughes. GE was down 13.9% in the week of Nov. 5, thanks to CEO Larry Culp's slashing of the company's storied dividend down to $0.01 per quarter on Oct. 30. Although Baker trades separately from GE, the conglomerate's woes may have had an impact on investors' views of Baker. 

Now what

Despite Baker's poor performance in November, it has actually outperformed Halliburton and Schlumberger so far this year, down 31.8% as opposed to Schlumberger's 38.5% and Halliburton's 39.4%. On the other hand, it's underperformed those peers over three-, five-, and 10-year time frames. 

GE has announced its plan to sell its stake in Baker Hughes to raise capital, so if its relationship with Baker is indeed a drag on the company, it won't be for much longer. However, there are better buys in the oil and gas space right now.

John Bromels owns shares of General Electric. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Baker Hughes Company Stock Quote
Baker Hughes Company
$23.71 (2.24%) $0.52
General Electric Stock Quote
General Electric
$67.44 (-0.15%) $0.10

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/05/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.