PTEN: Time to Take Profits on Patterson-UTI
Posted on Monday, April 21st, 2008 | In Stocks to WatchJust three months ago I said it looked like Patterson-UTI (PTEN) was poised to profit from an eventual rise in oil prices. I liked the fact that its free cash flow yield was much higher than those of its peers Helmerich & Payne (HP) and Grey Wolf (GW – Annual Report). I also said the momentum is clearly with HP, and I wouldn’t blame anyone for wanting to let that winner ride.
Since that time, all three stocks have posted solid gains, and the ranking has largely met my expectations: 57.6% gains for Helmerich and Patterson, and a “mere” 43.7% for Grey Wolf. Meanwhile, the S&P 500 has risen just 4.3%.
With more than 53% outperformance in three months, and a stock price that is way out in front of its 50 day moving average, I think it’s time to take profits on Patterson. The recent relative performance now means its free cash flow yield is less than that of Grey Wolf. While there is a possible catch-up play in Grey Wolf, my inclination is to stay on the sidelines for now.
Disclosure: At time of publication, William Trent has no financial position in the companies mentioned.
Disclosure: Author is long UNITED STS OIL FD LP UNITS (USO) at time of publication.
Last 5 posts by William Trent
- Capacity Utilization - August 16th, 2009
- Corporate Profits - July 12th, 2009
- Capacity Utilization - April 18th, 2009
- Another Record: Capacity Utilization - April 2nd, 2009
- Record Territory - March 27th, 2009
 About William A. Trent (http://stockmarketbeat.com)
Stock Market Beat editor William A. Trent, CFA, has been an equity analyst since 1996 and is co-author of Understanding and Evaluating Prospectuses, Offering Documents, and Proxy Statements. His experience includes stints with institutional investors responsible for more than $70 billion in assets and covers all market-cap sizes. Sector concentrations have been within the TMT (Telecom, Media and Technology) and Transportation sectors. He is also the senior editor of Financial Education. He is available for freelance writing and consulting projects and can be contacted here. |
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