Mainely Stocks

[ari5000]

long term buy: RIG


I bought RIG today for a long term investment. It is down 1.80 today to 57.43.

Nobody wants to touch RIG.

Despite projections of earning over $8/share this year.

Assuming some extremely weak earnings... the lowest fair value I can come up with is $97/share.


RIG looks dangerously weak but of course, the lower the price goes, the less riskier it actually is.

Let's think five years from now: Will the BP disaster shut down offshore drilling? Will RIG still be in business? Will oil prices be higher or lower?


Rig is now near 57 and may go to 55 or 50. It's still worth in the 90s. My feeling here is -- if you can buy a small enough position so that you can just forget about it, and check back in five years, you'll make a profit. It may wind up returning

If RIG hits $91/share in 2015 -- that will be equivalent to making a 10% return annually on your purchase. So it's not a get rich quick scheme. If it gets back to the 90s before then, obviously your return on investment would be higher. As I write RIG is now UNDER 57. So the margin of safety is only getting better as the BP news dominates short term buying.

I think this is a nice idea since the long term trend in oil will be up most likely.



Here's the chart:

http://stockcharts.com/h-sc/ui?s=RIG&p=D&yr=0&mn=9&dy=0&id=p14205419497

All good value purchases are usually made when the chart looks like death. Good luck if you buy in.