Norman Levine Baker Hughes Company BKR-Q WEAK BUY Jul 25, 2017

Being acquired by Halliburton (HAL-N). The oil service sector is not really a place you want to be in. If you own this, you might just as well accept the Halliburton offer as it is a larger, more liquid stock with a wider geographical range. Not an area that he likes.

He tends to screen stocks out after a merger starts. There will be a ticker for the new entity. He thinks Baker Hughes is overvalued. GE-N is potentially buying them at the bottom.

(Market Call Minute.) They are doing a deal with General Electric (GE-N) which is exciting. As an alternative, he would suggest Schlumberger (SLB-N).

Fairly recently acquired by General Electric (GE-N) to form an oil/gas partnership using the GE oil and gas service business. If you are a Baker Hughes shareholder, you get a one-time $17.50 dividend. This company has a really strong balance sheet. Presuming the deal is approved mid-2017, the new partnership will be the 2^nd largest oil/gas service company in the world on a revenue basis. Thinks energy is starting to form a bottom. As long as oil prices don’t collapse, the combined entity will be very strong. If the deal doesn’t go through, this company will receive a break up fee, of about $1.3 billion. Dividend yield of 1.12%. (Analysts’ price target is $62.17.)

The oil service business has had its ups and downs, and was really reliant on drilling activity. Most of his exposure is in the Canadian market. He prefers Halliburton (HAL-N).

(Top Pick Nov 29/16, Up 2.69%) Just before the OPEC production cuts were announced. They are forming a partnership with GE oil services. They will be second in size to Schlumberger after that deal. If it does not get consummated over the summer they will get a huge breakup fee from GE-N. It does not matter if the deal goes through or not, just if the price of oil collapses. Otherwise it is undervalued.

You have to be careful. They issued a one-time special dividend to shareholders, so the $47 share price drop to $33 is artificial. When the deal first happened post the special dividend, the cost basis was something like $33-$35, so you might not be down as much as you think. He really likes this company here. The reports coming from Caterpillar/McDonald’s is that China is growing quite strong, which is going to help the demand side of the oil equation, and the combined entity of GE/Baker Hughes is now the 2^nd largest in terms of revenue from the oil services business. For the long-term, this is a very compelling a holding.

Recently reported a mixed quarter: soft revenues and modest earnings beat. But guidance was weak: about 8-9% growth overseas but low-single-digit declines in the U.S. Shares have sunk 5%. This has been the worst oil driller for a long time.

Is 6% from 52-week highs. Is 54 on RSI, so momentum is healthy, in a long-term uptrend since 2022. Companies rely on them to maximize yield on an oil field or set up a new rig. Are few of these companies. He's long.