Every once in a while I buy a few shares of Halliburton stock. Every once in a while I sell a few shares of Halliburton stock. Since our firm tracks and forecasts HAL’s 16 product lines, I figure we know just about as much about HAL as a guy can know. That, however, does not make me a good investor. Here’s why:
Consider the following graph. The graph plots HAL’s quarterly oilfield revenues from 2013 through today, and HAL’s share price mid-quarter through the same period:d
Source: Spears & Associates' Drilling and Completion Outlook
Look at 2014. In Q4, investors saw OPEC threatening to flood the world with oil and they bailed from HAL (and from all other oilfield service company stocks). So while HAL was busy earning its best quarter ever, HAL share prices collapsed from almost $70 to $40 and then to almost $30.
Now look at 2016. The summer of 2016 was the worst time in the oilfield in years, yet HAL’s share price climbed about 60%, roaring all the way into 2017, which was to become one of the strongest revenue recovery years on record… in the US.
Now look at 2017. HAL revenues were surging on the strength of US land, but share values retreated hard.
And, look at 2018. HAL’s global sales are flat because international struggles are offsetting US strength, yet share prices are climbing.
Does Halliburton’s share price REFLECT Halliburton’s revenue? Nope. The R-squared is a lousy 0.35. Does share price PREDICT revenue? Nope… an every lousier 0.20. Does share price LAG revenue? Kind of... the R-square is 0.60.
The best indicator of share price is investor sentiment. If investors like the oilpatch, HAL’s share price will rise. If investors consider oil to be a pariah, HAL’s share price will fall.
As of this writing, investors don’t sound very interested.