Parker Drilling Company: PKD

It's not too late to find value in the energy services sector. Parker Drilling Company (PKD) continues to be a value stock even as shares hit new multi-year highs. This Zacks #1 Rank (strong buy) is now trading with a forward P/E of 14.2, up from 11.9 in mid-November.

Parker Drilling provides contract drilling solutions, rental tools and project management to the energy industry. It has 25 land rigs and 2 offshore barge rigs in its international fleet. Its U.S. fleet consists of 13 barge rigs in the Gulf of Mexico.

The company's rental tool segment supplies equipment to operators on land and offshore in the U.S. and some international markets.

Parker Surprised in Q3 by 38%

On Nov 3, Parker reported its third quarter results and surprised on the Zacks Consensus Estimate by 5 cents. Earnings per share were 18 cents compared with the consensus of just 13 cents. The company only broke even in the year ago quarter.

Revenue rose to $176.6 million from $172 million a year ago. The quarter was boosted, again, by big growth in the Rental Tools segment. Sales rose 30% to $62.4 million from $48.1 million a year ago.

Demand for drill pipe and related products, especially from operators drilling in the shale plays, continued to expand.

The level of international and deepwater Gulf of Mexico placements also increased in the quarter. U.S. Drilling revenue rose 94% to $28.9 million from $14.9 million a year ago.

For the quarter, Parker had an average of 10.7 barge rigs employed compared to about 7.6 barge rigs which were employed in the third quarter of 2010.

Zacks Consensus Estimates Rise

The estimate picture for Parker looks good. As you can see from the price and consensus chart below, estimates fell off a cliff, along with the stock price, during the Great Recession in 2008/2009.

But the earnings have turned it around and now the chart is very bullish, showing the 2012 consensus estimate again rising another 45% after an expected 550% earnings growth in 2011.

That is a huge turnaround from 2010 when the company made just 8 cents for the entire year.

The 2011 Zacks Consensus Estimate has risen to 52 cents from 46 cents in the last 60 days. Whereas the 2012 Zacks Consensus Estimate has also jumped to 75 cents from 69 cents.

Shares at 3-Year Highs

Since the summer sell-off shares have spiked to new 3-year highs which is why the stock is now more expensive, on a P/E basis, than it was just a few months ago when I last covered it.

But even with a P/E of 14.2, it is still considered a "value" stock as my cut-off is at 15x.

The company also has a price-to-book ratio of only 1.4. A P/B ratio under 3.0 is considered a value.

Parker Drilling is a way for investors to get into the hot energy play, especially in the shale, without actually owning one of the explorers themselves. Parker is scheduled to report fourth quarter results on Feb 22.

David Morgan: There Are More Reasons To Be In Gold Than Ever

2012, challenging times ahead: BNP Paribas

• Fukushima, the Arab spring, the EMU crisis… 2011 marked a turning point

• Challenges are numerous for 2012

Challenges are numerous for 2012. It will probably be a turning point in the European history, as we move closer to the make or brake moment. Growth prospects in the euro zone are bleak, as austerity is implemented rather universally, with fresh new measures announced this week in Spain. Germany could however surprise on the upside, as spelled out by recent surveys (manufacturing PMI, IFO Index) that could follow the US path (bottoming out before being translated into hard data). We tend to be more optimistic about US prospects as the Fed would launch QE3 were the Congress fail to extend the lowered rate of payroll tax. Growth in emerging countries will also be crucial, especially in Brazil and China. The former came to a stall in end-2011 and the latter face a great challenge in its housing sector. In this highly unsettled context, elections will be held in major countries, starting with Finland in January, followed by Russia in March, France (the President in April-May, the Parliament in June), Mexico (July), China (the National Congress of the Communist Party of China will be held in October), and the US in November. 2012 will definitely be about politics. Still, try and have fun and do not fear the end of the world. At least, there is one thing we can be sure about: it will not happen on December the 20th…

• Download the full report

More Recession-Proof Stocks : CA, CERN, CL, KO, ORCL, QSII

Think we're headed back into a recession? A lot of investors do. They are buying the most defensive, recession-proof names they can get their hands on. That means consumer staples names Colgate Palmolive (NYSE:CL) and Coca-Cola (NYSE:KO) are quickly coming back into favor; both are knocking on the door of new highs. Makes sense, as it's unlikely consumers will give up the most basic daily things - no matter how deep the economy sinks.

There's another group of stocks that do just as well in a recessionary period though, and these corporations don't make anything you can eat or clean yourself with. In fact, these companies don't even target consumers at all - at least not individual consumers.

Corporate Staples
In the same sense that the average consumer just isn't going to give up food or hygiene no matter how tough times get, some corporations can't give up something they've grown quite accustomed to as well - their technology. Specifically, a whole host of enterprises are quite married to their software-as-a-service and database management service, so much so that they couldn't get rid of it if they wanted to.

This is a unique business. Unlike auto manufacturing or retailing, technology service providers are built from the ground up not to generate one-time sales, but rather generate recurring revenue on a monthly and quarterly basis.

Oracle Sees Solid Growth
It's a model that's worked well for the likes of Oracle (Nasdaq:ORCL). While the company has seen its ups and downs on the personnel front (the Mark Hurd, HP saga), Oracle made more for shareholders in 2008 than it did in 2007, and made more in 2009 than it did in 2008. In fact, Oracle's earnings have increased solidly every year since 2005.

How does that happen when every other industry is still struggling to push itself up off the mat? It's the recurring-revenue nature of the database and software management business. Once Oracle integrates itself into the daily routine of its customers, it's entrenched.

The Niche Player
Where Oracle paints a broad brush stroke in the industry, some of the more focused names perform even better within a particular niche.

Take Cerner Corporation (Nasdaq:CERN) for instance. This supplier of healthcare information technology solutions has also grown its top and bottom line every year since 2006, sailing right through the 2008 recession as if it wasn't happening. Lasts year's revenue of $1.8 billion led to a bottom line of $237 million. Both were records. Although shares are priced at a hefty 37.4 times trailing earnings, the consistent fiscal progress is undeniable.

Right Idea, Wrong Stocks
While Oracle and Cerner are fine stocks in their own way, as is so often the case, the highest-profile name in the group isn't necessarily the best stock in that group.

Among the healthcare technology names, Quality Systems (Nasdaq:QSII) may be the better choice. With shares priced at 28.11 times trailing earnings, it may not going to win any value awards. After four straight quarters of earnings increases though - not to mention five consecutive years of higher per-share profits (through 2010) - it's tough to deny it is a growth juggernaut.

In the same broad vein as Oracle, smaller New York-based CA Inc. (NYSE:CA) may be a wiser choice. Like Quality Systems as well as Oracle, CA has created stunningly reliable growth regardless of the environment. For every quarter over the past two years now, the company has posted high year over year quarterly profits. And, it also boasts five straight years of improved profits, as if the recession wasn't even happening.

3 Major Stock Trends for 2012... and How to Profit

Three major trends developing right now will greatly influence equities in 2012. Yet despite an immensely difficult trading environment — compounded by the seemingly never-ending eurozone debacle — several important forces are at play setting up specific investing and trading opportunities for the new year.

Here’s what you’ll need to know to stay on top of your game as the new calendar year approaches:

1. Pharma stocks are set to outperform the market —

When it comes to prescription medications, Plavix, Symbicort and Viagra are three household names that have generated massive revenues during their respective lifetimes. And even though these three medications treat very different ailments, they do all have one important thing in common: Each of these drugs’ patents is set to expire within the next two years.

These aren’t the only big-name drugs that could give way to cheap generics. By 2016, patents are set to expire for many of the best-selling drugs on the market, totaling $255 billion in annual sales, according to EvaluatePharma Ltd., a London research firm. Now numerous generic makers are preparing drug applications for what should be an influx of new, cheaper drugs to the market.

It’s not just the generic drug makers that are looking to post significant gains in Well-positioned pharmaceutical giants are already showing incredible strength. In fact, Eli Lilly & Co. (NYSE: LLY) is posted new 52-week highs this morning, capping off a strong December run.

2. Technology stocks are faltering —

Semiconductors were a strong performer for most of 2011. However, the tide appears to be turning for these tech stocks. The Dow Jones US Semiconductor Index flexed its muscles through November, yet failed to top its October highs. What resulted was a double-top, then lower highs after the post-Thanksgiving rally:

Semiconductors are performing poorly relative to the market at large — and they aren’t the only tech stocks that have hit a wall. Poor earnings this week from Oracle Corp. (NASDAQ: ORCL) and the stock’s subsequent drop highlight how fragile the entire sector has become. It would be wise to avoid tech names for the time being — I do not see these stocks bouncing back anytime soon…

3. A consumer comeback will propel new market leaders —

Under the surface, unemployment statistics are showing strong improvements. New claims for unemployment benefits dropped to the lowest we’ve seen in more than three and a half years last week. If this trend continues (or accelerates), it will be a help to restart a stalled economy. “The drop in firings in the U.S. may be helping boost confidence. The Bloomberg comfort index rose last week to the highest level in five months as all three components — state of the economy, buying climate and personal finances — improved,” according to Bloomberg.

This should also help reinvigorate consumer spending, helping to push top retail stocks to new highs. We’re already seeing stocks like Wal-Mart Stores Inc. (NYSE: WMT) and The Home Depot Inc.

(NYSE: HD) lead the market this month with strong uptrends. There is a strong possibility that these names continue to post new highs in the coming weeks and months.

Jay Taylor: Turning Hard Times Into Good Times

12/27/2011: Protecting Yourself against the Creature from Jekyll Island

The Secret to Making Money Trading in 2012... and Beyond

Statistically, trading may be one of the most difficult ways to make money. In fact, it's estimated that up to 90% of traders lose money. That's a shame, since there are several simple trading systems that trounce the market.

Unfortunately, not all traders are ready to take advantage of winning trading systems. They require patience.

Major trends, the type that create real wealth, take time to develop. Traders that get caught up in the day-to-day market volatility miss the biggest market moves. Some of the best trading systems in world help traders ignore market noise while gains build up in their account.

The ten-month moving average trading system, for example, has consistently beaten the market and reduces risk over the long term. This simple trading strategy is long when the closing price of the market, or any security, is above the 10-month moving average and in cash whenever prices close below the average. If we apply a 10-month moving average to the S&P 500 Index since 1961, this easy to follow system beats buy-and-hold while reducing risk.

Risk is reduced by getting out of the market before major bear markets take back bull market profits. As the market turns down, prices fall below the 10-month moving average and trigger a sell signal. Impatient investors looking for an edge might try a 10-week or even a 10-day moving average to get "buy" and "sell" signals before other traders. That's a mistake. Test results show that the shorter moving averages actually reduce profits and increase risk over the 50-year test period:

Profits come from the big trends and weekly or daily moving averages give too many false signals. Prices often move quickly above and below short-term moving average, generating a series of small trades. These small trades are known as whipsaw trades, and they destroy returns. Trading with monthly moving averages reduces whipsaw trades and delivers bigger gains.

The chart below shows the difference in trading activity between the 10-day and 10-month moving average during the past 6 months. Trades are taken each time prices cross through the moving average.

During the past 6 months, the S&P 500 is down about -6%. Trading the 10-day moving average would have lead to 16 trades for a loss of about -8% -- worse than just holding the S&P 500. The 10-month moving average would have generated only two trades, for a small loss of less than 1%.

This simple observation led me to discover my own long-term profit machine - the 6-month rate of change (ROC) system. My system signals me to buy the best performing assets from the past six months. In the long-term, my system works very well -- it has delivered an average annual return of +14.9% since January 2007. The S&P 500 is barely breakeven in the same time period.

Trying to gain an edge by using a shorter term rate of change trading systems eats away profits. A 13-week ROC system, for example, would have lost -3% a year, a drastic drop from +14.9% annual returns with a 6-month ROC system. The reality is long-term winners are more reliable performers than short-term high fliers.

Right now, my system is signaling for traders to be patient. It's still holding three bond ETFs -- iShares Lehman 7-10 Year Treasury (IEF), iShares Barclays 20+ Year Treasury Bonds (TLT), and iShares iBoxx Investment Grade Corporate Bonds (LQD). These "boring" bond funds have significantly outperformed the market during the past six months. TLT is up more than 20%, IEF is up 9% and LQD has gained 2%.

The S&P 500 is down about -6%.

As I mentioned last week, my trading system has a great track-record trading bonds. So I have no problem holding bonds until my system says it's time to buy riskier assets. I recommend traders looking for big, long-term gains also be patient.