Category Archives: Helmerich & Payne

Coppock Curve: Helmerich & Payne

On Monday February 12, 2018, we kicked off the Coppock Curve series with one of the largest oil field service company, Halliburton. Today, we continued on that oil sector review with a drilling company, Helmerich & Payne (HP).

One aspect that we like about Helmerich & Payne is its long history. Because of that, we are able to extract the data going back as far as 1982. The chart below displays HP's Coppock Curve from 1982 until now. Such a long history allows us to study the effectiveness of this strategy. Continue reading

Details of the Ideal Transaction

On January 12, 2016, we took a position in Helmerich & Payne (HP) at $47.41.  At the time, HP was coming off of a high of $118.29.

According to Dow Theory, an investor should only expect one half of the previous move.  With this in mind, we charted an upside target of approximately $79.16 as the likely point for selling the stock as outlined in our July 2, 2016 posting.

On January 13, 2017, we sold our holdings in HP at $78.31 for a gain of +74%. For reasons unknown, HP declined from $78.31 to $43.02 by September 1, 2017, a decline of –45%.  An outline of the change from February 3, 2014 to January 12, 2018 is charted below.

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The Rationale

Naturally, this is the most ideal transaction that we could engage in.  Below we will lay out our observations on how we accomplished this task.

First and foremost, Helmerich & Payne is a high quality oil and gas driller that survived the crash that was experienced after the 1970’s.  In our view, if a company can increase their dividend over many years and survive a period that put a lot of competitors out of business, then you’re dealing with a good management team.  What follows are the details that we are looking at.

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Performance Review: Helmerich and Payne

On January 15, 2017, we reviewed Helmerich and Payne (HP) after it achieved our July 2, 2016 upside target of $79.16.  At the time, we reflected on the following thoughts:

“The only question now is the selling of the stock.”

For all intents and purposes, HP should have been considered for selling the principal or the entire position.  Since the January 15, 2017 posting the stock has had the following price action:

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Our fear then was, “Can we handle see[ing] the stock fall back to where we bought it?”  This thought only comes to mind when or if the stock price substantially exceeds the norm for an individual investment.  At the time, HP had annualized gains of more than +60%.

For now, it is back to the drawing board for HP.  We’ll have to re-examine the attributes for the stock to determine if investment is warranted or not.

Using Dow Theory with Helmerich & Payne

The core of Dow Theory is the emphasis of value investing, anticipating investor behavior and knowing when to accept fair profits.  This posting outlines the basic premise of these core concepts.

On September 14, 2015, we posted a Quick Take of Helmerich & Payne (HP) with the following thoughts:

“If HP were to achieve a similar –77% decline as the period from June 23, 2008 to December 4, 2008, HP would fall to the $27.29 level.  We advise that investors consider HP at the ascending $39.43 level or below.”

“The dividend payout ratio is a decent indication of the best times to consider a stock.  Whenever the dividend payout ratio exceeded 80% [of] the price, Helmerich & Payne was at a relative low.  Already, HP is at a payout ratio of 91.67% based on estimated 2015 earnings of $3.00 per share.”

This commentary is essential as investing is really about values.  As Charles H. Dow has said:

"The one sure thing in speculation is that values determine prices in the long run. Manipulation is effective temporarily, but the investor establishes price in the end.  The object of all speculation is to foresee coming changes in values. Whoever knows that the value of a stock has run ahead of price and is likely to be sustained can buy that stock with confidence that as its value is recognized by investors, the price will rise (Dow, Charles H. Review and Outlook.  Wall Street Journal. February 25, 1902.)."

Unfortunately, most writers on the topic of Dow Theory fixate on chart patterns while ignoring values and then call it Dow’s Theory.  Suffice to say, we made a purchase of Helmerich & Payne on January 12, 2016 and on January 20, 2016, Helmerich & Payne achieved a new 52-week low, nearly –7% below our purchase price.

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Our purchase was predicated on the belief that:

“The thought with great operators is not whether a price can be advanced, but whether the value of property which they propose to buy will lead investors and speculators six months hence to take stock at figures from ten to twenty points above present prices (Dow, Charles H. Review and Outlook. Wall Street Journal. July 20, 1901.).”

On July 2, 2016, we reviewed the price performance of Helmerich & Payne with the following commentary:

“As can be seen in Edson Gould’s Speed Resistance Line (SRL), Helmerich & Payne did decline below the ascending $39.43 level on January 20, 2016, nearly 3 months after the initially posted article.”

“…the most pressing level to watch for is Dow Theory’s 50% Principle which measures the rise (or fall) of a stock at the halfway point between the prior major move.  In the case of Helmerich & Payne, the halfway point of the last major move (July 2014 to January 2016) is at $79.16 which is illustrated below.”

Achieving our target of $79.16 based on Dow’s 50% Principle (which front-loads investor expectations) prompts the following thoughts from Charles Dow:

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Review: HP Achieves Downside Target and Rebounds

On September 14, 2015, we posted to our site an article about Helmerich & Payne (HP).  At the time we had the following investment conclusion:

“We advise that investors consider HP at the ascending $39.43 level or below.”

HP fell to the level indicated in our posting and has since increased +37% from the article date and +50% from the date of when the stock crossed below the ascending $39.43 level.  Below is the updated Speed Resistance Lines and our perspective on the potential for the stock going forward.