In 1981 I resigned from my district engineer job at Halliburton to start a little acidizing company in Enid, Oklahoma. When I had signed on with Halliburton two years before, my mom and dad had given me 6 shares of the company’s stock (along with a really sweet aluminum Halliburton briefcase). Back in those days the share price of a company’s stock was discovered by opening the newspaper each morning, finding the symbol hidden among a thousand other stock symbols, and reading the closing price from the prior day.
For the two years I worked at Halliburton, I was way too busy to read the newspaper, much less look up the share price of HAL. I felt how busy we were throughout the US and how crazy-profitable the company was at the time, so I assumed that those 6 shares of HAL stock would be worth a fortune. I gathered up my stock certificates and marched down to a local trader to find out how rich I was about to become.
I no longer remember the actual price of the shares, but I remember clearly the odd look on the trader’s face and the heartbreak I felt when he showed me that the shares were worth only a fraction of what my parents had bought them for two years before.
This was my introduction to the harsh world of investing in oilfield service company stocks, where a company’s instantaneous performance has little to do with its perceived value in the marketplace. HAL was dumping cash to the bottom line, but investors had abandoned the stock because they were looking forward to 1982, when they expected a downturn to occur.
And since then I have seen this pattern repeat for 40 years.
I am writing this from a tall building in Midtown Manhattan. In every office building, in every meeting with investors in public securities, there is an attitude of malaise, a feeling that oilfield service company stocks are no longer to be desired. This attitude will surprise the young field engineer busting his butt in the West Texas oilfields right now, where he’s working harder and making more money for his company than ever before… maybe even more than in 2014. This negative attitude will surprise the drill bit salesman in Oklahoma City, who just had another record month. It will shock the directional drilling manager in Colorado who can’t get enough people to run the jobs he has coming up in September.
While this inverse pattern has repeated many times in the last 40 years, just as many times the oilfield equipment and service industry has fallen back into favor and Wall Street jumps in, bidding share values up.
There is an old adage about investing: Buy on the cannons, sell on the trumpets. Right now here in New York there are cannons everywhere.