|Written by GSCR Staff|
|Thursday, 11 December 2014 07:05|
Last week we told you how to profit with oil’s downfall. This week we are looking for bargain basement prices, particularly related to oil.
In July of 2013 we featured Hercules Offshore, Inc. (NASDAQ – HERO - $1.16) at a price of $7.55. Below is the chart for HERO since that time.
HERO 18 Month Chart
As you can see, we missed this one as this stock has gone down the drain along with black gold.
Hercules together with its subsidiaries, provides shallow-water drilling and marine services to the oil and natural gas exploration and production industry worldwide. As of February 2014, the Company owned a fleet of 38 jackup rigs, and 19 liftboat vessels, as well as operated 5 liftboat vessels owned by third party. It serves national oil and gas companies, integrated energy companies, and independent oil and natural gas operators.
The question is when will oil hit bottom and how can we get in cheaply? HERO offers a great chance from a purely speculative view at a close to a $1 per share.
Hercules is still running efficiently with 16% operating margin and selling at a decent price point with a 42% gross margin. The Company is also well funded with nearly $200 million cash on hand as of the end of 3Q14. Finally, even with a downturn in oil prices, analysts’ forecasts are for nearly $1 billion in revenue up nearly 10% from this year.
We like HERO here as way to get in on an oil bottom. If you are really frugal, April 2015 calls at the $2.50 strike are priced at $.10 (Which is $10 for 100 shares per contract) with price declines the higher the strike price if naked or covered calls are more your speed. A rebound in oil could trigger a huge jump in HERO and the stock could double in less than a year.
Have a great day!
Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.
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