Sold HAL
I sold my 60 shares of Halliburton (HAL) today at $24.30, which were originally purchased on 2/17/09 for $16.75. Reason being, the market (and oil) was up today, and I am still trying to reduce long exposure. With regard to energy, I was willing to sell either HAL or CHK (which I bought pre 2009). My thesis with HAL is just not as strong as it was back in February, now that oil has risen significantly.
Here’s my take on valuation…
Just like a doctor takes into account various symptoms before making a diagnosis, I like to look at different valuation metrics from different financial statements. I loosely calculate from the income statement earnings yield, and earnings before interest and taxes (EBIT) yield; from the balance sheet (and income statement) return on invested capital (ROIC); from the statement of cash flows cash return yield; and dividend yield. I am interested in the earnings on the income statement as well as where the cash is going. Further, what amount of earnings is made relative to the capital required, and how much of a dividend am I getting while waiting for the thesis to play out.
With HAL at $24.30, investors are getting less than a 3% cash return, and under a 7% earnings return. ROIC and EBIT yield are fair, but the dividend yield is only 1.5%. These returns just aren’t that attractive, and I’m not getting paid much (in dividends) to wait. (In hindsight, had I done a more extensive calculation on these metrics, I am unsure if I would have even bought HAL, though I would have purchased something else levered to oil).
