We have another "guru" + "drillers" trading idea today... one that could make you 25%-50% in a short time...
Long time Growth Stock Wire readers might recall our 2010 piece on superinvestor David Einhorn and his position in Ensco. Einhorn is a young guy, under 50... but he's justly considered one of the world's best money managers. When Einhorn makes a big bet, it's always worth paying attention to... and even following him into the trade.
That's what we suggested doing during the summer of 2010, when Einhorn took a big position in offshore driller Ensco. Back then, the entire drilling sector was in a deeply oversold state, due to the post-Gulf of Mexico oil spill panic. The panic was so great, outstanding companies with little exposure to the Gulf of Mexico (like Ensco) were trading for less than six times annual cash flow.
Just after our essay, Ensco enjoyed a 40% rally. You can make a lot of money trading "guru ideas" in the volatile drilling sector... which brings us to today's opportunity...
Regular Stansberry & Associates readers know we consider Sprott Asset Management one of the world's top contrarian asset-management firms. Its founder, Eric Sprott, is likely the best investor you've never heard of. The firm is particularly known for its expertise in resource investment. It has funds that focus on sectors like precious metals and oil & gas.
Sprott's energy fund is managed by Eric Nuttall. And he's bullish on Trican Well Service (TSX: T.TCW, Stock Forum), a $2.4 billion Canadian oil-services firm. Trican is one of the country's biggest suppliers of horizontal drilling and hydraulic fracturing (aka "fracking") services to oil & gas producers. (This technology has unlocked incredible amounts of energy from North America's shale fields.)
Like most assets, Trican suffered a big selloff last fall. Shares dropped from $25 to $15 (a 40% decline). After this selloff, Nuttall sees value. He recently told BNN (Canada's version of CNBC) that Trican is one of his favourite ideas right now. He noted several weeks ago that the stock was trading for the super-cheap multiple of 3.2 times EBITDA (a measure of earnings professional investors use). Nuttall likes Trican so much that as of January 31, it was his largest position.
As practitioners of "common sense technical analysis," we're drawn to this stock as well. We use charts to find assets that have suffered big selloffs... but have found a bottom. As you can see from the chart below, Trican has found a bottom around $16 per share. That's where traders find value and step in to buy.
If investors warm up to the drilling sector (robust oil prices suggest they will) and things simply get "less bad" for Trican, these cheap shares could leap 25%-50% in a matter of months. Traders could set a stop near $15 and risk less than $1 per share for the chance of making $5-$8.
Trican is cheap, it's out of favour, and one of the world's top investment shops has a large position. This set-up worked in 2010, and it's likely to work again.