Did You Grab Your 43% Gains?
“Sure things” don’t exist in the equity markets. Let’s face it… there’s always a risk something crazy and unexpected is going to happen.
And I’m not just talking about macro events. Sure, no one can predict pipeline explosions or natural disasters. But even at the micro level, there are often surprises. Individual companies might suffer from fraud. A popular CEO might suddenly up and quit. You just never know…
But every once in a while, an investment opportunity comes along you can’t pass up on. It’s as close to a “sure thing” as you’re going to find.
For example, take a look at SeaDrill (SDRL). I first wrote about the company just over two months ago.
Back then it was trading just over $20. And it had a dividend around $1.75 – that’s an 8% yield. At the time, I recommended buying SDRL shares.
When I found this company, it looked too good to be true. How could an oil drilling company with huge growth potential also be offering a fat dividend?
Ever heard the phrase “Don’t look a gift horse in the mouth”? Well, this was one of those times.
When I recommended SDRL on July 12th, it was trading around $20.50. Since then, it’s jumped to over $28.50. And it’s also paid a $0.61 dividend! We grabbed a total return of over 43%.
Not bad for a 10-week period.
Here’s the thing…
I originally recommended SDRL because I felt it would rebound from the BP spill. I thought once the spill crisis was past, we’d see a spike in the share price.
And that’s exactly what happened. But it doesn’t end there…
You see, SDRL’s growth potential is still strong.
Remember, the company’s building more rigs around the world. Once these rigs come online, revenues will start climbing. And as revenues climb, we should see higher share prices.
What’s more, the company’s dividend has actually increased since then. The shares are now yielding nearly 9%.
There’s even another catalyst which could push SDRL even higher… oil prices.
Oil prices fell while SDRL’s share price climbed! Keep in mind, the company’s business is primarily based on the value of oil.
In other words, as oil prices increase, SDRL has a significant chance of climbing as well. And we should start seeing an increase in oil prices as the economy improves.
So what should you do now?
We’ve seen over a 40% increase already in SDRL. And since then, the dividend has increased, more rigs are opening up, and oil prices haven’t started moving higher.
One more thing… the company’s share price is only trading around 5x earnings. Even though the oil drilling industry has seen a rebound, the industry average is still over 11x earnings. If SDRL just trades at the industry average, it could double in price.
It seems to me this company looks like a “sure thing”.
If you didn’t grab your SDRL shares in July, here’s another chance. The company still has massive growth potential and you’ll be collecting a nice dividend to boot. Take a look at SDRL and consider adding it to your portfolio.
Category: Commodities
