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The Risks for National Oilwell Varco Investors

By Jim Mueller, CFA and Austin Smith - Dec 25, 2012 at 2:00PM

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Good investors see National Oilwell Varco as a safe bet. Better investors know that there's no such thing as a safe bet.

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.

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Stocks Mentioned

National Oilwell Varco, Inc. Stock Quote
National Oilwell Varco, Inc.
NOV
$16.64 (2.53%) $0.41
BP p.l.c. Stock Quote
BP p.l.c.
BP
$28.79 (1.97%) $0.56
SeaDrill Limited Stock Quote
SeaDrill Limited
SDRL
Transocean Ltd. Stock Quote
Transocean Ltd.
RIG
$3.59 (2.87%) $0.10

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

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