By Paul Price
Virtual Value Porfolio holding Baker-Hughes (BHI) was highlighted in this week's Barrons. 'The Trader' column discussed the prospect of a move back towards $80 per share from last week's close of $46.49.
Baker-Hughes is the world's second-largest provider of fracking services. U.S. rig counts have declined but managment sees increased activity in Canada and is forecasting that U.S. rig counts will rise for the rest of the year. International operations offer additional opportunities for growth.
Baker-Hughes' price/earnings ratio is 13.1 times. The shares yield 1.29%. Earnings per share (EPS) may dip to $3.05 this year from $3.20 last year, but analysts see EPS rising to $4.08 in 2014.
Alexander Roepers, of Atlantic Investment Management, owns more than 1% of the outstanding shares.
"The earnings power is good, but they've just been somehow underperforming, and we're trying to get to the bottom of that," Roepers said. "If they do that and deploy cash to pay down debt and buy back shares, the stock could go back to $80, based on $5.50 in earnings two years from now."
Barrons concluded their positive blurb with this assessment: "With positive secular trends supporting it, and some prodding from activist investors, Baker-Hughes could be a gusher in coming quarters."
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