WW3 incoming? SLB - Geopolitical Hedge
Güncellendi
As the issues in the Middle East continue to deteriorate, it is prudent to look at opportunities in the market in the event of further escalation and rising oil prices.
Technical Analysis
Inverse Head and Shoulders pattern which suggests a possible upside of $200 in the event that oil reaches over $125 per barrel. We appear to have finished Wave 5 of the corrective cycle, coinciding with the Wave C of the ABC Elliot Wave Pattern. The downside target of $38 was met and it is where I went long. Stop loss placed at $38 (break even), which is also below the neckline of the inverse head and shoulders pattern. I would like to see a break above $44 for further continuation of this local uptrend.
Current Political Climate and Possible tailwinds for SLB
1. Oil Price Sensitivity: SLB (Schlumberger) is one of the world’s largest oilfield services companies, deeply tied to the oil and gas industry. A geopolitical issue in the Middle East, a critical region for global oil production, can lead to disruptions in oil supply, resulting in higher oil prices. Historically, rising oil prices boost demand for oilfield services as companies ramp up production to capitalize on the higher price environment. SLB, providing essential services such as drilling, reservoir characterization, and production, stands to benefit from increased exploration and production activity.
2. Increased Capital Expenditures: With rising oil prices, oil companies typically increase capital expenditures to explore and extract more oil. SLB, as a leading provider of technology and services for the energy industry, would see increased demand for its offerings, from drilling equipment to digital solutions. This translates into stronger revenue growth, better profit margins, and, ultimately, a rise in SLB's stock price as the company capitalizes on the oil price boom.
3. Geopolitical Hedge: SLB’s global footprint provides a hedge against localized geopolitical risks. While tensions in the Middle East might disrupt oil supplies from the region, SLB’s operations span across multiple continents, allowing it to continue benefiting from oil price increases while also maintaining business continuity in regions unaffected by the geopolitical tensions. They continue to operate in Russia, despite their competitors withdrawing from the region.
Key Fundamentals of SLB
1. Industry Leadership and Market Position: SLB is a dominant player in the oilfield services sector, with a strong global presence. Its diverse portfolio of services, including digital, drilling, and production systems, gives it a competitive edge in helping energy companies optimize their operations.
2. Strong Balance Sheet: SLB has maintained a solid financial position, with a focus on managing its debt and generating cash flow. The company’s cash flow strength supports its ability to invest in innovation, shareholder returns, and potential future expansion, further solidifying its position in the market.
3. Dividend and Shareholder Returns: SLB has a history of returning capital to shareholders through dividends. As a key player in the energy services sector, it maintains a healthy dividend yield, which is attractive to investors looking for income alongside capital appreciation.
Not financial advice, simply sharing why I went long on SLB.
Technical Analysis
Inverse Head and Shoulders pattern which suggests a possible upside of $200 in the event that oil reaches over $125 per barrel. We appear to have finished Wave 5 of the corrective cycle, coinciding with the Wave C of the ABC Elliot Wave Pattern. The downside target of $38 was met and it is where I went long. Stop loss placed at $38 (break even), which is also below the neckline of the inverse head and shoulders pattern. I would like to see a break above $44 for further continuation of this local uptrend.
Current Political Climate and Possible tailwinds for SLB
1. Oil Price Sensitivity: SLB (Schlumberger) is one of the world’s largest oilfield services companies, deeply tied to the oil and gas industry. A geopolitical issue in the Middle East, a critical region for global oil production, can lead to disruptions in oil supply, resulting in higher oil prices. Historically, rising oil prices boost demand for oilfield services as companies ramp up production to capitalize on the higher price environment. SLB, providing essential services such as drilling, reservoir characterization, and production, stands to benefit from increased exploration and production activity.
2. Increased Capital Expenditures: With rising oil prices, oil companies typically increase capital expenditures to explore and extract more oil. SLB, as a leading provider of technology and services for the energy industry, would see increased demand for its offerings, from drilling equipment to digital solutions. This translates into stronger revenue growth, better profit margins, and, ultimately, a rise in SLB's stock price as the company capitalizes on the oil price boom.
3. Geopolitical Hedge: SLB’s global footprint provides a hedge against localized geopolitical risks. While tensions in the Middle East might disrupt oil supplies from the region, SLB’s operations span across multiple continents, allowing it to continue benefiting from oil price increases while also maintaining business continuity in regions unaffected by the geopolitical tensions. They continue to operate in Russia, despite their competitors withdrawing from the region.
Key Fundamentals of SLB
1. Industry Leadership and Market Position: SLB is a dominant player in the oilfield services sector, with a strong global presence. Its diverse portfolio of services, including digital, drilling, and production systems, gives it a competitive edge in helping energy companies optimize their operations.
2. Strong Balance Sheet: SLB has maintained a solid financial position, with a focus on managing its debt and generating cash flow. The company’s cash flow strength supports its ability to invest in innovation, shareholder returns, and potential future expansion, further solidifying its position in the market.
3. Dividend and Shareholder Returns: SLB has a history of returning capital to shareholders through dividends. As a key player in the energy services sector, it maintains a healthy dividend yield, which is attractive to investors looking for income alongside capital appreciation.
Not financial advice, simply sharing why I went long on SLB.
İşlem elle kapatılmış
Closed this on Friday at profit, before oil went back down. Oil could drop a lot more, so best to play it safe with oil services stock as demand is an issue.
Feragatname
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