Seadrill
Limited is an offshore drilling contractor providing worldwide offshore
drilling services to the oil and gas industry. After touching a high of $48.09
in October 2013, the stock has been under some pressure with market giving too
much emphasis on outlook for reduced capex and slowdown in the industry. The
stock closed at $34.11 on 22-Mar-2013, offering a very attractive yield of 11.49%.
I think Mr. Market is offering a clear bargain here. The stock has
underperformed while the market continues to rally. The recent earnings call
clearly demonstrated existence of backlogs running through 2015 with more deals
expected to come through. This makes dividend quite safe for the next couple of
years. One thing we have to accept is that energy demand is going to continue
to increase with continued global recovery and sooner or later capex would have
to be increased. When that happens, Mr. Market won't be as generous as he is
today. Moreover, after such a big run in the equities, such bargains are quite
rate these days.
I will
start building position Seadrill Ltd, starting with 10 shares that I bought
yesterday. This new position adds to my existing high exposure to energy sector
(now over 15%), but I’m comfortable right now as that is where the value is.
