Precision Drilling (PD.TO)

(A Top Pick Sept 12/13. Up 28.49%.) This is absolutely a “go to” play. There is plenty of room to grow. They’ve won a number of contracts. Pricing and utilization have been moving up. Notwithstanding the volatility in the price of gas and oil, they have been getting market share in the US and in key plays. Taking market share from US competition and smaller players. Yield of 1.78%.

Chart looks like it is trying to form a 2^nd shoulder. $13 is a pretty good risk/reward.

Largest driller in Western Canada and 4^th largest onshore driller in the US. It is expanding beyond those borders. On a macro basis, he likes the energy field, and because of the outlook for global growth we will see more drilling and more activity in the various oil areas. Recently did a deal with Schlumberger (SLB-N) where they will use their technical expertise and marketing assistance to reach a broader list of customers in the US. He sees a 40%-50% gain at least, over the next year or so. Yields of 1.84%.

Just bought it a couple of months ago. Drilling stocks had strong performance year to date. We are getting a little bit of pull back here.

Chart shows a rounded bottom from 2011. Now seems to be forming a handle (for a cup and handle pattern) and if it rallies off this small pullback, it should be very, very positive for the company.

Closed at $12.99 and he has a model price of $22.10, an upside of 70%. This is a cyclical and in the last 6 weeks, with the energy patch, it has corrected back. However, it is at one of his structural levels of EBV+2, which is $12.99. If it doesn’t Hold, he would sell the name but would look to be Buying it here if it Holds.

He is not too excited about the oil side, but feels better about the oilfield services side. If you are going to have exposure to energy, it probably should be through the oilfield services. This is one of the leaders, so if capital money managers, etc. are going to go somewhere, they’ll go to this company. Chart shows a breakout in February, followed by a corrective period at around $13. It probably works higher and will take out the top.

Likes the energy field. Most modern and largest fleet in Western Canada. Signed a deal with Schlumberger Ltd. (SLB-N) to round out the product offering.

Very illustrative of what his position has been lately. Owned this for quite a long time and made a lot of money. Recently took some profits around current levels, trimming about half his position. Would have probably sold it all if he didn’t feel that it still had scope going forward. Still likes the company, and it will prosper going forward. If you own, consider taking profits. Recently announced an agreement with Schlumberger (SLB-N), which is going to open up some new markets for them.

Drillers tend to be more volatile than producers. People have been buying service companies as a leveraged way to play the increase in natural gas pricing. His concern is that, as natural gas prices have fallen, service names will be weak. Just announced pretty good results. He can see the stock price at $16-$17. He owns some of the smaller companies because they are trading at slightly lower multiples, and can grow a little faster. If you own, Hold into the fall, when it will be very strong for the energy complex in general.

Demand for drilling services is picking up. Pricing should firm up in the second half. Pulled back because of weaker activity in the last couple of months. He would buy as you head into the fall.

Made a great deal today with Schlumberger (SLB-N). This is something you want to keep holding. The service names were very under owned and under loved since 2008, and now they are coming back.

Seasonality for the stock is the same as for the energy sector in general. January until May, and late July until October. Technically, chart shows it in an upward trend. Probably close to its 20 day moving average. Looks very, very good.

Chart shows that it has done very well, and has formed a nice upwards channel. He would use this channel, along with a 50 day moving average as an exit point, which is currently sitting at about $14.21. It has potential for more momentum. The only downside is that the volume is not great. You want to see a nice increase from February up to now starting with $10. It might be at the $14-$15 level for a while. Sees support at about $13, but if it breaks below that you want to be out of it. (See Top Picks for his preference.)

This is interesting, because if we go forward, and some of these pipelines actually get completed, we are going to have to drill out an awful lot of gas and oil to fill them. Has had a pretty good run, so if you are in a trading situation, you might trim a little, but if it's not a big part of your portfolio, he would just Hold.