What: Shares of National Oilwell Varco (NYSE:NOV) have had a rough month and a half, falling 15% since the beginning of July.
So what: The biggest driver of National Oilwell Varco's decline has been falling oil prices. As oil falls, it's logical that demand for the company's equipment will decline long-term. But there could be a silver lining for investors focused on the long term.
Management says that onshore pricing and demand have stabilized and the U.S. drilling industry in general has been more resilient than many expected. If the market is reaching a bottom now and conditions are at least stable going forward, there could be significant upside for investors.
Now what: There's clearly a lot of risk in energy investments right now because oil prices have remained low far longer than most experts predicted. But one of the reasons it has stayed low is because the U.S. drilling industry hasn't slowed nearly as much as people predicted. That's good news for National Oilwell Varco, despite the stock's recent drop.
I think long-term this is still an indispensable company to the energy industry, and investors willing to be patient with energy prices will be rewarded for holding on to this stock.