Why Schlumberger Looks Like a Solid Investment
On Friday morning shares of the country’s largest oil service company, Schlumberger (NYSE:SLB), hit a multiyear high. While it is usually never a good idea to buy a stock at a multiyear high, the fact that investors are confident in the name suggests that it is a name to consider buying on a 5 to 10 percent pullback.
Schlumberger is an oil service company, meaning that it leases drills, equipment, and technology to oil companies. Schlumberger helps oil companies in all aspects of the oil extraction business, from exploration to production. As the leader in the industry, Schlumberger has strong pricing power. Furthermore, it has steady revenues despite near-term volatility in the oil and gas markets. So long as oil and gas demand remain strong, there will be demand for Schlumberger’s services, and this is great for the business.
Furthermore, in a strong oil market, the company has the power to raise its prices, and this is good for margins and profitability. Therefore, investors looking for exposure to the oil market may want to buy shares in a company such as Schlumberger rather than in one of the more popular oil investments, such as Exxon Mobil (NYSE:XOM). While the latter will benefit more directly from rising commodity prices, Schlumberger will have consistently strong profitability, and those investors who are risk-averse should consider taking a position.