Category Archives: Helmerich & Payne

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.

Quick Take: Helmerich & Payne

It is clear that the commodity market is in the dumps.  The chart below outlines the course of the Bloomberg Commodity Index since the July 2008 peak.

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With the decline that has occurred in the index, it would be obvious to any long-term investor that there are values to be had.  Yeah, there are risks but we’re investors not savers (anyone confused about the difference between saving and investing?  Savers expect the money to be there no matter what, investors are taking the risk that more or less will be there, after the passage of time).  One idea that we think is worth entertaining (or researching) is a stock that we’ve followed for many years.

Cimarex (XEC) at a New Low

Today, Cimarex (XEC) hit a new 1 and 2-year low as the energy sector continues to fall apart.  We like Cimarex (XEC) because it is a spin-off from Helmerich & Payne (HP) which has had a tremendous dividend increasing history.  Additionally, we have been very fortunate in being able to call most of the peaks and troughs in the price of Helmerich & Payne found at the links below:

Cimarex appears to be willing to continue the conservative management style that got Helmerich & Payne through hard times in the oil drilling industry during the 1980’s and 1990’s.  Therefore, we believe that Cimarex should be on your watch list as well.

Below is the Altimeter for Cimarex since being spun off from Helmerich & Payne:

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note: dividend data prior to 2006 is hypothetical based on $0.04 quarterly payment

We believe that whenever the Altimeter is trading at or above 1032 the stock should be sold.  Additionally, whenever Cimarex’s Altimeter is trading at 600 or below, the stock should be considered for acquisition.  Below is the performance of buy and sell indications based on the Altimeter levels just mentioned:

Date Price Altimeter buy/sell % change
6/26/2003 23.96 599 buy 72.29%
3/3/2005 41.28 1032 sell -47.25%
10/10/2008 32.66 544 buy 90.02%
3/11/2010 62.06 1034 sell -42.18%
8/22/2011 59.81 598 buy ??????????

Our expectation is that Cimarex may decline as low as, and possibly lower, than the 2009 level on the Altimeter.  That would equal a price of $31.80, or -30% from the current price.  A purchase of the stock at this time may be warranted, based on the Altimeter.  However, be prepared to buy more at lower prices.