Investment Guide 2015
Sunday, September 27, 2015
RESTOCKING As oil prices drop, retail rises in rankings
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Tulsa World • September 27, 2015
INVESTMENT GUIDE
Stock guide seeks positives in volatility • Despite market crashes, it might be good time to buy in.
Rankings of area-interest stocks 1. Wal-Mart 2. BOK Financial Corp. 3. Williams Cos. Inc. 4. Sonic Corp. 5. ConocoPhillips 6. ONEOK Inc. 7. Tyson Foods 8. American Electric Power 9. Helmerich & Payne
BY JOHN STANCAVAGE
World Business Columnist
When your computer gets overwhelmed, you usually hit the reset button. Perhaps that’s just what the bad day last month — Aug. 24 — did as the Dow Jones industrial average plunged more than 1,000 points early and inished down 588 points. For stockholders who hadn’t ever seen a signiicant market downturn before, the move was frightening. Some did the worst thing fear can cause an investor to do: They panicked and sold their shares. What was the “smart money” doing on that same day? Buying, of course. “We bought some stocks at dream prices,” said Jake Dollarhide, CEO of Longbow Asset Management in Tulsa. Dollarhide and some other inancial analysts expect the market to be volatile at least through the end of the year, as investors have their nerves frayed by problems in China and the Middle East,
STAFF
Editor: Colleen Almeida Smith
(last year’s No. 1)
10. BancFirst Corp. 11. (tie) AAON Inc. 11. (tie) Magellan
Midstream Partners 13. Phillips 66 14. (tie) Devon Energy 14. (tie) Dillards 16. ONEOK Partners 17. Continental Resources 18. OGE Energy Corp. 19. Chesapeake Energy 20. (tie) WPX Energy 20. (tie) Matrix Service
A visitor to the inancial district walks past the New York Stock Exchange earlier this month. Stock market downswings should create more chances to buy solid stocks at good prices, the experts say. MARY ALTAFFER/Associated Press
slow economic growth in the U.S. and the direction of interest rates. But downswings should create more chances to buy solid stocks at good prices, the experts say. Many analysts recommend that local stocks make up a portion of your portfolio. Why? The reasons go beyond supporting hometown names. Local stocks can be easier to track than other stocks, as they get in-depth coverage here at the Tulsa World. You may know someone who
works for an area public irm and be able to glean some (legal) clues about how the company is doing from them. Or, since they are close by, you could just ask for a tour. To give you some assistance on your quest, we ofer the 2015 Tulsa World Investment Guide. It collects the top stocks, as chosen by a panel of local analysts. What makes our guide a little diferent from similar lists is that we poll our stockpickers to select companies that have the best prospects of doing well over the next 12
months. We feel this is more relevant than simply listing last year’s winners. So grab a red pen and get ready to circle some companies that sound interesting in these pages. Then go do some more research and ask your investment professional about them. Finally, you may want to wait for a day your picks
get knocked down a bit — it doesn’t have to be a “Black Monday” type of crash — and buy some shares. “I know volatility is upsetting, but at the end of the day, that’s where you ind more opportunities,” said Jim Huntzinger, chief economist for BOK Financial and another of our Investment Guide analysts. Before you buy, though, make sure you have the stomach for more volatility and a long-range horizon, warned Fred Russell, owner of Fredric E. Russell Investment Management in Tulsa. “If you are going to need the money sooner than ive years from now, put it into something else,” Russell said. Finally, here’s where we add our standard words of caution about using the guide: Know that the information is provided for general reader information only; realize that the ratings do not equal a recommendation or endorsement of any stock; and see a professional before investing your hard-earned cash. Now, since the market has reset, maybe it’s time to do the same with your portfolio. John Stancavage 918-581-8314 john.stancavage@tulsaworld.cojm
THE PICKERS The following Tulsa-area investment advisers, stockbrokers and money managers provided their picks for this year’s guide.
Assistant editor: Adam Daigle
James Arens II
Jake Dollarhide
Ying Qi
Presentation editor:
Tim Chamberlin
The Trust Company of Oklahoma
Longbow Asset Management Co.
Fredric E. Russell Investment Management Co.
Writers: John Stancavage,
Andrew Boyd
Keith Goddard
Dan Safranek
Robert Evatt, Casey Smith, Stacy Ryburn, Sonya Colberg, Jack Money and Colleen Almeida Smith
Gibraltar Capital Management
Capital Advisors Inc.
Safranek and Associates LLC
James W. Brock
Jim Huntzinger
Sidney Shupack
Graphics and design:
Ameriprise Financial Services Inc.
BOK Financial Corp.
First State Investment Advisors Inc.
Cover photo: Hannah Hinton, department manager at Walmart, 3900 E. Hillside Drive in Broken Arrow, stocks pharmacy items on shelves earlier this month.
Steve Care
Donna Maddox
Brian L. Smith
Edward Jones
Financial Planning Resources Inc.
Brian L. Smith Financial Advisor
Bruce DeShazo
Skip Nichols
Qian Zhang
American Heritage Investments
Financial Planning Resources Inc.
Fredric E. Russell Investment Management Co.
Steven Reckinger
CORY YOUNG/Tulsa World
Tulsa World • September 27, 2015
INVESTMENT GUIDE
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WAL-MART STORES INC.
Wal-Mart a top pick despite slight dip • Pluses include smaller urban stores, more e-sales. BY ROBERT EVATT
World Business Writer
When asked why WalMart was among his top area stock picks, Andrew Boyd of Gibraltar Capital Management had an immediate, halfjoking reply. “One of the reasons I picked it is because it’s not dependent on oil and gas,” he said. Although it certainly helps that Wal-Mart wasn’t afected by the latest energy bust, Boyd and other local stock pickers believe the Bentonville, Arkansas-based retail giant is poised to have a strong year. That optimism comes even though Wal-Mart took a slight
hit in its most recent quarterly results. In the second quarter ending July 31, revenue stayed almost steady at $120.1 billion compared to $120.2 billion the same time last year, although income dropped to $6.1 billion versus $6.7 billion in the previous second quarter. In the same time period, earnings per share dropped from $1.27 per share to $1.08 per share. Boyd said the drop was mostly based on the company’s very public decision to increase their wages. Speciically, all workers now make at least $9 per hour, with the amount increasing to $10 per hour starting in February. While it caused an immediate drop in proits, Boyd said it’s still a good move. “That should also result in lower employee costs and turnover in the long run,”
Boyd said. James Brock of Brock and Associates said Wal-Mart typically works to soften the blow to investors from shortterm setbacks. “They buy back shares occasionally to keep dividends paying out,” he said. Wal-Mart’s most recent dividend in August was 49 cents per share, the same as the upcoming dividend payment scheduled for Dec. 2. Most analysts believe WalMart’s sales should continue to increase in the U.S., although Brock noted the amount of its sales that come outside from the U.S. has grown to 30 percent. “We now have a global economy, and retail growth will occur and continue to occur outside of the U.S.,” Brock said. Boyd said the chain’s strate-
gy of building smaller stores in urban areas as well as smaller, grocery-focused Neighborhood Markets will help it to continue to grow, along with its refocused eforts online. “They’ve devoted a lot of time and efort into improving their e-commerce site, so that could pay of,” he said. Although the stock has already taken a hit in recent months, Brock said the company’s status as a discounter is a balancing act that could leave it open to mistakes. “They can’t be complacent about how they price their product and do their purchasing,” he said. But overall, both Brock and Boyd believe the stock is conservative and stable, as well as undervalued. Robert Evatt 918-581-8447 robert.evatt@tulsaworld.com
1
Wal-Mart Stores Inc. Dollars per share
S O N D J F M A M J J A S 2014 2015
Wal-Mart Address: 702 SW Eighth St., Bentonville, AR 72716 Phone: 479-273-6463 Website: walmart.com Chairman: Greg Penner President and CEO: Doug McMillion Ticker symbol (Exchange):
WMT (NYSE) Operation: Multinational retail corporation.
95 90 85 80 75 70 65 60
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Tulsa World • September 27, 2015
INVESTMENT GUIDE
BOK FINANCIAL CORP.
You can always bank on BOK Financial BOK Financial Address: BOK Tower, P.O. Box 2300, Tulsa, OK 74172 Phone: 918-588-6000 Web: bokf.com Chairman: George B. Kaiser Symbol (Exchange): BOKF (Nasdaq) Operation: A regional inancial services company.
Inc. has 2.32 percent and California-based fund Denali Advisors LLC has 0.8 percent. BOK last reported its inancial results July 29. The company earned $1.15 a share, beating the Thomson Reuters consensus estimate of $1.10 by 5 cents, compared with earnings of $1.10 a share a year earlier. On average, equities ana-
BOK Financial ofers full-service banking in Oklahoma (where it operates Bank of Oklahoma), Texas, New Mexico, northwest Arkansas, Colorado, Arizona and Kansas/Missouri. MIKE SIMONS/Tulsa World
• Customer service, managed growth and steady proits indicate a solid “A.” BY JOHN STANCAVAGE
World Business Columnist
Bank of Oklahoma has made big strides in the past 15 years toward becoming a inancial powerhouse. Once an awkward size — bigger than a community bank but not yet a mid-size regional force — its expansion into other states now has it positioned strongly for the future, analysts say. The holding company now ofers full-service banking in Oklahoma (where it operates Bank of Oklahoma), Texas, New Mexico, northwest Arkansas, Colorado, Arizona and Kansas/Missouri. BOK Financial has man-
aged its growth carefully and still proits from smart, nimble leadership in its Tulsa headquarters, said Skip Nichols. Nichols, head of Financial Planning Resources, made BOK his No. 2 pick in this year’s Investment Guide. BOK could do well no matter which direction interest rates move. “Even if rates rise a little, that could initially increase lending since people will want to borrow before the percentage goes up even more,” Nichols said. Banking stocks, in general, could do well over the next few years, he said. “The inancial sector has under-performed the market. As a result, the shares of many banks are a good bet for appreciation,” Nichols said. The stock-picker’s high opinion of BOK is shared by some other analysts nation-
wide. BOK recently was upgraded earlier this year by equity research analytical irm Zacks from “hold” to “buy.” Zacks has a $69 target price on the stock. Overall, out of nine brokers covering BOK Financial at mid-year, three rate it a “buy” with zero recommending “sell.” The highest target is $76.5 and the mean goal price is $69, according to Thomson/First Call. The George Kaiser Family Foundation continues to have the biggest stake in BOK Financial, with ownership at the end of the irst quarter of 6.99 million shares for 68.28 percent of the U.S. longstock exposure. Other investors also have signiicant stakes, however. Nuance Investments LLC, for instance, owns 1.4 million shares of BOK; Yost Capital Management LLC has 4.54 percent; Reinhart Partners
BOK Financial Corp. Dollars per share
75 70 65 60 55
S O N D J F M A M J J A S 2014 2015
50
lysts forecast that BOK Financial will post earnings of $4.47 per share for the current year. About the only downside with BOK is that its fortunes are tied to U.S. inancial markets. “If the economy slips and the stock market falls, then bank stocks like BOK would follow the market,” Nichols said. John Stancavage 918-581-8314 john.stancavage@tulsaworld.cojm
Tulsa World • September 27, 2015
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INVESTMENT GUIDE
3
WILLIAMS COS. INC.
Strong business plan keeps them in the game BY CASEY SMITH
World Business Writer
Williams Cos.’ value has attracted the attention of potential buyers, an area certified financial planner who selected the company as his top pick for this year’s investment guide noted in commentary about the selection. “They have a strong management team that’s developed a dynamic plan for current and future growth,” said Dan Safranek, founder of Safranek & Associates. “Management recognizes the need to maximize shareholder value, even if that includes a sale of the company.” In addition to management’s focus on maximizing shareholder value, Safranek also highlighted the energy infrastructure company’s strong business plan in a lowprice energy environment.
Williams Cos. has strong business plan, one analyst said. Tulsa World ile
Williams generates fee income for transporting hydrocarbons in its pipelines. The strategy positions the company extremely well to weather the slump in commodity prices, Safranek said. Whether leaders at Wil-
liams Cos. opt to sell the company to one of its suitors or remain independent, Safranek noted that owning shares in WMB is a “win-win situation” for investors. Williams announced in June that it had turned down an unsolicited $53.1 billion allequity bid from Dallas-based Energy Transfer Equity LP. However, the Tulsa-based energy infrastructure company also announced that it would be exploring “strategic alternatives” that could include a sale, a merger or continuing as an independent company with its current growth plan. Oil and natural gas pipeline company Spectra Energy Corp. also briefly expressed interest in buying Williams. “If they are bought out, their stock price could surge 30 to 40 percent from current levels,” Safranek said.
“They won’t be had cheaply.” If a buyout does not occur, Williams and its investors will be just fine, he said. “WMB does not necessarily need to sell itself to realize its value potential,” he said. If Williams doesn’t sell, then investors can expect to collect a solid dividend yield of 5 percent that’s growing 10 percent to 15 percent yearly, he said. And now could be the perfect time for investors who don’t own shares in Williams to jump on board. “WMB’s deliberate and strategic process of handling a potential sale along with the markets overall decline has caused its stock price to decline to a much more attractive entry point,” Safranek said. Casey Smith 918-732-8106 casey.smith@tulsaworld.com
Williams Companies, Inc. Dollars per share
65 60 55 50 45
S O N D J F M A M J J A S 2014 2015
Williams Cos. Address: 1 Williams Center, Tulsa, OK 74172 Phone: 918-573-2000 Website: co.williams.com Chairman: Frank MacInnis President and CEO: Alan S. Armstrong Symbol (Exchange): WMB (NYSE) Operation: A leading energy infrastructure company in North America.
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Tulsa World • September 27, 2015
INVESTMENT GUIDE
SONIC CORP.
Sonic Drive-In restaurants have built on the success of attracting diferent customers at diferent times of the day. JAMES GIBBARD/Tulsa World ile
Sonic’s ‘tried and true’ sales plan pays of BY JOHN STANCAVAGE
World Business Columnist
Oklahoma City-based Sonic Corp. likes to tweak its menu regularly to ofer customers something new, but it never strays too far from the basics of burgers, fries and shakes. This is in contrast to other fast-food chains which have tried to ofer healthier choices such as salads or fruit. Those experiments, in general, have not fared as well. “Sonic doesn’t pretend to be everything for everybody,” said Jake Dollarhide, CEO of Longbow Asset Management. “That’s one thing I like about it.” The drive-in restaurant chain also has been able to take advantage of the slow improvement in the economy during the past ive years. “People are able to do more
Sonic Corp. Dollars per share
38 36 34 32 30 28
S O N D J F M A M J J A S 2014 2015
Sonic Corp. Address: 300 Johnny Bench Drive, Oklahoma City, OK 73104 Phone: 405-225-4846 Website: sonicdrivein.com Chairman, CEO and President:
Cliford Hudson
Symbol (Exchange): SONC (Nasdaq)
Operation: Franchises and op-
erates a nationwide drive-in restaurant chain.
26
discretionary spending, and eating out is a big part of that,” Dollarhide said. Sonic also realizes the value of serving people all day, starting with breakfast, followed by lunch, “happy hour,” dinner and even latenight snacks. The company has found it attracts diferent people to those varying times of the day, widening its customer base, CEO Clif Hudson said during an appearance on
CNBC’s “Mad Money” show earlier this year. Hudson also told host Jim Cramer that Sonic plans to continue its strong share buyback program through 2016. The Street’s ratings team evaluated Sonic as a “Hold” with a ratings score of C+. “The primary factors that have impacted our rating are mixed — some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or
negative performance for this stock relative to most other stocks,” the analysts said. “The company’s strengths can be seen in multiple areas, such as its revenue growth, impressive record of earningsper-share growth and compelling growth in net income. However, ... we ind that the company’s proit margins have been poor overall.” During the past iscal year, Sonic increased its bottom line by earning 85 cents versus 64 cents in the prior year.
For 2015, market analysts expect $1.09 per share. Overall, shares of Sonic have received an average recommendation of “Hold” from the 15 research irms, Analyst-RatingsNetwork.com reported just after mid-year. One research analyst has given the stock a sell rating, six have assigned a hold rating and eight have issued a buy rating on the company. The average 12-month target price among brokerages that have issued ratings on the stock in the last year is $37.09 a share. Further economic growth could bring Sonic investors an even bigger bite of proits. “Sonic is a solid, blue-chip, dividend-paying stock,” Dollarhide said. John Stancavage 918-581-8314 john.stancavage@tulsaworld.com
Tulsa World • September 27, 2015
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INVESTMENT GUIDE
5
CONOCOPHILLIPS
Firm holds positive track record in time BY STACY RYBURN
ConocoPhillips
World Staf Writer
When consumers get relief at the pump because of low gas prices, it spells grief for the oil and gas companies — even the big ones. ConocoPhillips, a major energy company out of Houston that specializes in exploration and production of crude oil, announced Sept. 1 that it would cut 10 percent of its jobs globally. The news hit home for the approximately 1,700 ConocoPhillips employees in Bartlesville. The move was painful for many, but it exempliied the company’s ability and willingness to adapt, First State Investment Advisors President Sid Shupack said. “They’ll cut everything they possibly can to lay those long projects sensibly and build cash low,” he
Dollars per share
75
45
To make up the diference, the company has had to make cuts — but in doing so has remained a reliable investment, Shupack said. Shupack ranked ConocoPhillips as No. 2 on his list of investments. He might not rank them so high now in light of the layofs, but Shupack said he would still consider them a buy. Andrew Boyd with Gibraltar Capital Management, who ranked the company lower at No. 9, considers it a good in-
vestment because of its clearcut plan to navigate through a low-priced oil environment, he said. “I think people are losing hope for a quick V-shaped rebound in oil prices,” he said. “I think they could remain lower than people had hoped for a little bit longer than they’d hoped.” The company boasts a 6 percent dividend — up from 4 percent last year — through asset sales and reductions in capital spending, Boyd said.
65 60 55 50
ConocoPhillips recently announced it was slashing 10 percent of its workforce. AP ile
said. “It’ll be diicult for the folks around Bartlesville and Oklahoma where they’ve got so many people working, but they’ll cut globally, and that’s the only way you can come out it of when your product price is low.” Oil prices have dropped dramatically within the past few years because of an overabundance of supply, hovering around $46 per barrel, as opposed to nearly $100 during the Great Recession.
ConocoPhillips Address: 600 N. Dairy Ashford Road, Houston, TX 77079 Phone: 281-293-1000 Website: conocophillips.com Chairman and CEO: Ryan M. Lance Symbol (Exchange): COP
70
S O N D J F M A M J J A S 2014 2015
(NYSE)
Operation: Explores for, pro-
duces, transports and markets crude oil, natural gas, natural gas liquids, liqueied natural gas and bitumen on a worldwide basis.
At its lowest point, the stock dropped to $47.51 when the layofs were announced. Shares have fallen 42 percent over the past year and have been trading at their lowest prices in nearly ive years. For Boyd, whether to buy depends on the time horizon. “I think if you buy them right now, you’ll be glad you did three or ive years down the road,” he said. Stacy Ryburn 918-581-8300 stacy.ryburn@tulsaworld.com
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Tulsa World • September 27, 2015
INVESTMENT GUIDE
ONEOK INC.
ONEOK has network in place to win • Some of the most proliic natural gas basins and hubs use ONEOK channels.
ONEOK Inc. Address: 100 W. Fifth St., Tulsa, OK 74103 Phone: 877-208-7318 Website: oneok.com Chairman: John W. Gibson President and CEO: Terry K. Spencer
BY CASEY SMITH
World Business Writer
Prolonged low commodity prices have certainly impacted the attractiveness of ONEOK Inc. But the company’s stock is still one for investors to consider, according to the CEO of a Tulsa-based investment irm. ONEOK Inc. is the general partner of ONEOK Partners, a master limited partnership. ONEOK Partners operates a midstream network that connects some of the most proliic natural gas and natural gas liquids supply basins with key distribution hubs throughout the country. “As the general partner, ONEOK is entitled to 30 percent of the distributions paid out by the MLP,” said Keith C. Goddard, CEO of Capital Advisors Inc. “And this percentage can grow to 37 percent as distributions from the MLP increase over time. Capital projects at ONEOK Partners are supported by acreage dedications and life-of-lease gathering contracts to help mitigate risk.” Goddard acknowledged the signiicant pressure that uncertainty surrounding the future path of oil and gas prices has put on ONEOK but said that the investment still has potential. “Dividend coverage has deteriorated, which presents some risk for investors,” Goddard said. “But there is strong recovery potential if commodity prices can bounce even a little bit within a year or two.” During July, ONEOK Inc. declared a quarterly dividend of 60.5 cents per share, or $2.42 per share on an annualized basis. The amount is a 5 percent increase com-
Symbol (Exchange): OKE (NYSE)
Operation: General partner of
ONEOK Partners, a natural gas gathering, processing, storage and transportation company.
ONEOK Inc. Dollars per share
S O N D J F M A M J J A S 2014 2015
75 70 65 60 55 50 45 40 35 30
focused on making prudent inancial decisions that will beneit ONEOK shareholders for the long term.
The uncertainty surrounding the future path of oil and gas prices has put pressure on ONEOK Inc., but analysts believe the investment still has potential. Courtesy
pared with the second quarter 2014. Shortly after declaring the second-quarter dividend, ONEOK reported earnings of $76.5 million for the period ending June 30, up compared to $61.6 million during the same quarter in 2014.
“Sustained low commodity prices continued in the irst half of 2015 and impacted our inancial results,” Terry K. Spencer, president and chief executive oicer of ONEOK, said in a news release about the companies’ second-quarter results. “However, we remain
Our balance sheet remains strong, allowing us lexibility during the current market conditions.” While commodity prices may have been of for the period, Spencer noted in his remarks that the increase in transportation volumes for natural gas and natural gas liquids beneited both ONEOK Partners and ONEOK. Casey Smith 918-732-8106 casey.smith@tulsaworld.com
Tulsa World • September 27, 2015
INVESTMENT GUIDE
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TYSON FOODS
Tyson Foods finds success in merger BY ROBERT EVATT
World Business Writer
Tyson Foods
Now, more than ever, Tyson Foods isn’t just a chicken company. Late last summer, the $7.7 billion merger between the Springdale, Arkansas-based food producer and Hillshire Brands — known for Jimmy Dean, Hillshire Farm, Ball Park Franks and Sara Lee — became oicial. Mergers can be thorny, complicated actions, especially when companies are this large — pre-merger, Tyson was the largest processed meat producer in the U.S., while Hillshire was the 11th. But this particular merger has been going even better than expected, said James Arens II, chief investment oficer of The Trust Company of Oklahoma. “The Hillshire acquisition
Address: 2200 W. Don Tyson Parkway, Springdale, AR 72762 Phone: 479-290-4000 Website: tysonfoods.com Chairman: John Tyson President and CEO:
Donnie Smith
Symbol (Exchange): TSN (NYSE)
Operation: Specializes
Tyson Foods’ acquisition of Hillshire Brands helped diversify its oferings. AP ile
is working well for them,” he said. “They expected $200 million in cost savings, and so far they think that’s increased to $250 million.” James Brock, a certiied inancial planner with Brock & Associates, said even though
both companies are, broadly speaking, into processed meat, the acquisition of Hillshire helps diversify Tyson’s oferings. The massive purchase was a distinct departure from Tyson’s usual status as a stable
in processed meats and prepared foods with brands including Hillshire Farms, Jimmy Dean and Sara Lee.
company known for being a stable yet strong-performing company. Arens believes Tyson will resume that tradition by drawing down debt even as they repurchase their stock. “Tyson has a history of providing strong, free cash low,”
Tyson Foods Inc. Dollars per share
46 44 42 40 38
S O N D J F M A M J J A S 2014 2015
36
Arens said. Plus, Tyson’s been able to beneit from lower commodity prices in recent months. But that also opens up the company to problems should food prices rise, Brock said. “The company’s vulnerable to luctuations in commodity prices,” he said. “There are plenty of risks, but I believe Tyson’s best in class in that industry.” Robert Evatt 918-581-8447 robert.evatt@tulsaworld.com
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INVESTMENT GUIDE
AMERICAN ELECTRIC POWER
AEP diversity powers several states • Financial advisers like the consistent growth in AEP. BY CASEY SMITH
World Business Writer
In a market like the current one, area inancial adviser Brian Smith said the primary question he focuses on is where to ind returns for his clients. “I try to migrate toward dividend payers,” Smith said. And according to Smith, American Electric Power, or AEP, its the criteria. “They have a rising dividend history,” Smith said. “On an annualized basis over the last 10 years, they’ve increased they’re dividends 4 percent each year.” That’s better than the rate of inlation, Smith pointed out. The fact that AEP is not an energy company makes it a more stable choice than many other companies at the persent time, Smith said. The power generator’s broad service area also helps increase that stability, he added. AEP supplies power to more than 5 million customers in parts of 11 states. The 197,500-square-mile service territory covers parts of Arkansas, Indiana, Kentucky, Louisiana, Michigan, Ohio, Oklahoma, Tennessee, Texas, Virginia and West Virginia. The broad service area means that the company isn’t subject to any adverse regulation rulings systemwide, Smith said. Diversiication in the way that AEP produces power is also helpful, Smith said. Today, coal-fueled power plants account for approximately 60 percent of AEP’s generating capacity. Natural gas represents 23 percent and nuclear generation represents 5 percent. AEP has been enjoying lower fuel costs, but that savings has been ofset by demands emissions regulations
Cody Hiner, a journeyman lineman for AEP-PSO, is lifted into the air to put in a temporary dumper for a street widening project at Apache Street and Yale Avenue earlier this month. Photos by CORY YOUNG /Tulsa World
American Electric Power (AEP) Address: 1 Riverside Plaza, Columbus, OH 43215-2372 Phone: 614-716-1000 Website: aep.com Chairman, President and CEO: Nicholas K. Akins
are putting on the company. However, he said some of the investments put in due to emissions regulations have resulted in increased eiciency. “You’ve got a mixed bag,” Smith said. Casey Smith 918-732-8106 casey.smith@tulsaworld.com
Symbol (Exchange): AEP (NYSE)
Operation: One of the largest
electric utilities in the U.S., serving more than 5 million customers in 11 states.
American Electric Power Co., Inc. Dollars per share
S O N D J F M A M J J A S 2014 2015
66 64 62 60 58 56 54 52 50
Ronnie Thompson (left), a working foreman with AEP-PSO, moves a power line for a street widening project at Apache Street and Yale Avenue while journeyman lineman Cody Hiner (right) works to install a temporary dumper.
Tulsa World • September 27, 2015
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INVESTMENT GUIDE
9
HELMERICH & PAYNE
Balanced even when the market toddles BY STACY RYBURN World Staf Writer
Brand recognition and a well-kept balance sheet have made Tulsa’s Helmerich & Payne a reliable investment despite the slump in oil prices. Like everyone else in the oil and gas industry, H&P has felt the pinch of a low-priced oil environment. Its stock has fallen signiicantly from its 52-week high of $105 to about $53, right around the 52-week low. The drilling company still delivers a nearly 5.25 percent dividend yield for investors — something attributed in large part to smart management, said Dan Safranek with Safranek & Associates, who ranked H&P No. 6. “Everyone in the oil business knows it’s cyclical,” he said. “If you’re out long enough, you’ll see an up cycle and a down cycle. Obviously we’re in a down cycle right now.” H&P’s FlexRigs have become an industry brand-
name standard for its customers — much like the iPhone is in the cell-phone world — and as a result, can charge a premium for its products, said research analyst Ying Qi with Fredric E. Russell Investment Management Co., who ranked the company No. 5. “Even better, despite the premium H&P charges for its rigs, it still can complete wells for a lower total cost than its competition,” she said. H&P also boasts one of the best balance sheets in the industry. While other companies may be trying to keep their heads above water from loans and debt, H&P does not have that problem, Safranek said. It’s basically impossible to ind a company in the oil and gas industry that hasn’t had some number of layofs recently. H&P announced 2,000 such layofs in January because of a reduction in rig use from falling crude oil prices. All things considered, that
A Helmerich & Payne FlexRig5 works in south Texas. Courtesy
$50 per share stock could be a lot lower, Safranek said. “In the long term, when this thing turns, they’re going to be right there ready to capture the market and capture opportunities, whereas other companies may have a lag time to kind of get up to speed,” he said. In the third quarter, H&P
reported about $91 million in earnings, which was down about 53 percent from the $192.3 million the company earned during the same time period in 2014. Safranek and Qi both considered H&P to be a buy, especially in the long term. “To me, H&P is an incomegenerating stock with upside appreciation opportunity,” Qi said. The last few earnings reports have been a surprise on the upside, putting the company in a much better position than many analysts initially thought, Safranek said. “In terms of stock, most of the downside has been taken out of it. How much farther could it go down? We’re close to the 52-week low here; it couldn’t fall down too much farther,” he said. “How much upside is there? It could be tough to get a rally if oil stagnates, but you’re still collecting 5¼ percent when waiting on the recovery.” Stacy Ryburn 918-581-8300
Helmerich & Payne, Inc. Dollars per share
S O N D J F M A M J J A S 2014 2015
110 100 90 80 70 60 50 40
Helmerich & Payne Address: 1437 S. Boulder Ave., Tulsa, OK 74119 Phone: 918-742-5531 Website: hpinc.com President and CEO: John Lindsay Symbol (Exchange): HP (NYSE) Operation: Contract drilling company of oil and gas wells for exploration and production companies with land operations across the U.S., ofshore operations in the Gulf of Mexico, and international operations in South America, the Middle East and Africa.
stacy.ryburn@tulsaworld.com
10 BancFirst’s steady growth make it a long-term win BANCFIRST CORP.
BY ROBERT EVATT
World Business Writer
Bank of Oklahoma may be the best-known Oklahomabased banking company, but it’s not the only one the stock pickers are drawn to. BancFirst Corp., a statewide banking company with over 100 service areas in 52 Oklahoma communities, has been a stable performer over the last few years, though Skip Nichols, founder and president of Financial Planning Resources Inc., said banks in general are set to do well in the near future. “With interest rates in-
BancFirst Corp. Dollars per share
S O N D J F M A M J J A S 2014 2015
70 68 66 64 62 60 58 56 54
credibly low and poised to go higher, banks are poised to be able to make more money,” Nichols said. In BancFirst’s most recent quarterly report, its income grew to $18.6 million, or $1.19 per share, compared to $14.7
BancFirst Address: 101 N. Broadway, Oklahoma City, OK 73102 Phone: 405-270-1086 Website: bancirst.com Chairman: Gene Rainbolt President and CEO: David E. Rainbolt million, or 94 cents per share, the same quarter a year ago. On top of the predicted end of rock-bottom interest rates, Nichols said smaller banks should continue to avoid the high scrutiny that continues to plague the larger bank-
Symbol (Exchange): BANF (Nasdaq)
Operations: Largest state-
chartered bank in Oklahoma with locations in more than 50 communities.
ing corporations that were caught up in last decade’s mortgage bubble. But missing the mortgage bubble wasn’t the only positive thing the company’s done in recent years. Brian Smith, a inancial adviser in Owasso,
said the chain has treated its investors well. “Over the last ive years, they’ve increased their dividends on an annualized rate of 6 percent per year,” he said. “It should be attractive to the long-term investor.” Nichols said the main danger to BancFirst is a hit to the U.S. economy, but he doesn’t believe China’s economic woes will hurt in this country. “If the economy tightens up and people get afraid again, it could afect lending,” he said. Robert Evatt 918-581-8447 robert.evatt@tulsaworld.com
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Tulsa World • September 27, 2015
INVESTMENT GUIDE
AAON INC. (TIE)
Being cool is better with right equipment
BY SONYA COLBERG
World Correspondent
AAON Inc. is in the business of being cool — and making sure everyone else is, too. Indeed, the Tulsa-based manufacturer of large-scale air conditioning and heating units handed investors cool earnings of 84 cents per share last year. The hot financial results pushed AAON to Sidney Shupack’s top stock pick. “AAON’s got high growth rates in all major categories,” said Shupack. AAON’s profits hit a record-setting $44.2 million, up from $37.5 million in 2013. Sales grew almost 11 percent to $356 million. The company builds and sells units for the commercial, health care, education and manufacturing fields.
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AAON saw record proits in 2014. Tulsa World ile
“I also like the fact that AAON should grow maybe 10 percent in dividends and 15 percent in earnings,” said the Tulsa money manager. Shupack expects dividends will jump to about 24 cents next year. He estimates earnings may reach $1 this
year and about $1.20 next year. AAON shares have traded in the $17 to $25 range in the past 52 weeks. But Shupack is targeting $29 to $30 per share next year. Shupack has known fellow Rotary Club of Tulsa
member AAON chief executive Norm Asbjornson for decades. So the founder of First State Investment Advisors has gotten an eyeball-to-eyeball look at Asbjornson’s 27-year-old business. “Norm is super smart,” Shupack said. “It’s one of the fastest growing little companies.” Though AAON appears likely to improve along with the economy, Shupack said a downturn could flatten sales or slow sales growth. He doesn’t foresee that happening, but if it did, he said AAON has what it takes to weather bad conditions. “Norm makes a nice machine,” Shupack said. “People like it. It’s kind of a niche and he can get into his segment without too much competition. He does it real well.”
AAON Inc. Dollars per share
26 24 22 20 18
S O N D J F M A M J J A S 2014 2015
16
AAON Inc. Address: 2425 S. Yukon Ave., Tulsa, OK 74107 Phone: 918-583-2266 Website: aaon.com President and CEO: Norman H. Asbjornson Symbol (Exchange): AAON (Nasdaq) Operation: Manufactures and sells air-conditioning and heating equipment in the U.S. and Canada.
MAGELLAN MIDSTREAM PARTNERS (TIE)
Pipeline giant in position to capitalize
BY SONYA COLBERG
Magellan Midstream Partners LP
World Correspondent
Magellan Midstream Partners made $2.3 billion in revenue and watched its stock price swing from $61 to $90 per share over the past year. Low oil prices and stock market chaos recently knocked the share price back into the $66-$72 range. Yet the Tulsa-based pipeline giant may be in the cat bird seat, as analyst Qian Zhang sees it. Magellan transports, stores and distributes crude oil and refined petroleum products. And its storage and transportation divisions together generate 85 percent of total margin. U.S. crude oil supply is now bulging at the seams, ap-
Dollars per share
S O N D J F M A M J J A S 2014 2015
Magellan Midstream Partners transports, stores, and distributes oil and gasoline. STEPHEN PINGRY/Tulsa World ile
proaching 70 percent of capacity. Zhang said that situation raises a big question. “The $64,000 question is: Where to put it?” said Zhang, Fredric E. Russell Investment Management Co. investment manager. “Oil put in storage today could be there for years
95 90 85 80 75 70 65 60
and makes Magellan’s storage business very profitable.” In the transportation division, long-term contracts lock in much of the revenue. The contracts are based on changes to fixed goods in the Producer Price Index and regulated by the Federal Energy Regulatory Commission. “Those contracted prices provide inflation protection and allow Magellan to in-
Magellan Midstream Partners LP Address: One Williams Center, Tulsa, OK 74172 Phone: 918-574-7000 Website: magellanlp.com Chairman, President and CEO: Michael N. Mears
Symbol (Exchange): MMP (NYSE)
Operation: Engages in the
transportation, storage, and distribution of reined petroleum products and crude oil in the United States.
crease profits even with flat volumes,” Zhang said. She said Magellan’s business model will help it survive the downturn and rebound when the market improves.
Magellan recently reported a $208 million quarterly operating profit, up more than 16 percent from a year ago. Cash distributions to investors also rose 16 percent to 74 cents per share. Quarterly earnings reached 78 cents per share, hitting $3.57 over 12 months. TheStreet recently rated Magellan a “buy,” noting its “strengths can be seen in multiple areas, such as its compelling growth in net income, expanding profit margins and impressive record of earnings per share growth.” Although Magellan is generally considered low-risk, investment risks include exposure to commodity price fluctuations, cost overruns on expansion projects and lower-than-expected demand for refined products.
Tulsa World • September 27, 2015
INVESTMENT GUIDE
PAGE 13
13
PHILLIPS 66
Diversified assets are Phillips’ foundation BY STACY RYBURN World Staf Writer
Diversity in revenue, a signiicant geographical presence and Berkshire Hathaway’s recent massive investment, along with other factors, have made Phillips 66 a worthy long-term investment, according to analysts. Although it’s the largest reiner in the United States, Phillips 66 also holds interests in chemical and midstream assets, which add earnings stability and have higher historical returns, Trust Company of Oklahoma Chief Investment Oicer James Arens II said. Second-quarter earnings were up to $1 billion, or $1.84 per share, compared to $987 in the irst three months, or $1.79 per share, according to the Houston-based company’s earnings reports. Reining account for 60 percent of Phillips 66’s earnings in the second quarter, but by 2017, reining is expected to represent less than 30 percent of total earnings, Arens said. The diversiied assets — including Phillips’ presence in retail fuel marketing — have given the company a solid foundation in a low-priced oil environment, said Skip Nichols with Financial Planning Resources Inc. “Sooner or later, those oil prices per barrel will come back,” he said. Phillips 66’s stock quickly rose after splitting with ConocoPhillips more than three years ago. After jumping
Phillips 66 Dollars per share
S O N D J F M A M J J A S 2014 2015
90 85 80 75 70 65 60 55
Phillips 66 Address: P.O. Box 4428, Houston, TX 77210 Phone: 281-293-6600 Website: phillips66.com Chairman and CEO: Greg Garland Symbol (Exchange): PSX (NYSE) Operations: Has 15 crude oil reineries, 63,000 miles of pipelines, dozens of gas processing and NGL fractionation plants, and 10,000 retail fuel marketing outlets. from $29.09 in May 2012 (one month after the split) to nearly $90 in September 2014, the stock has hovered around $80. Berkshire’s $4.5 billion stake has given some investors hope that the Warren Bufet conglomerate will eventually acquire Phillips 66 — but that’s not likely, mainly because Phillips’ current $42 billion market valuation would make it too large for Berkshire, Arens said. Stacy Ryburn 918-581-8300 stacy.ryburn@tulsaworld.com
Phillips 66’s diversiied assests — including its retail presence — has given the company a solid foundation, analysts say. CORY YOUNG/Tulsa World ile
PAGE 14
Tulsa World • September 27, 2015
WEEKEND
14 14 Dillard’s fashions DILLARD’S (TIE)
DEVON ENERGY CORP. (TIE)
Devon still impressive to analysts, despite decline
itself attractive BY SONYA COLBERG
World Correspondent
Nearly eight decades after William T. Dillard borrowed $8,000 from his dad to open a store, Dillard’s has grown into a $6.8 billion fashion empire featuring about 300 upscale department stores and online sales. The family-run company irst ofered stock to the public in 1969. Shares over the past year have zig-zagged between $91 and $144 like an errant sewing machine. So, like Dillard himself, the ideal Dillard’s investor would be someone “who can stomach a little bit of risk,” said Andrew Boyd of Gibraltar Capital Management. “It’s a very fundamentally strong business,” said Boyd, who made Dillard’s one of his top three picks for the 2015 Investment Guide. “Their proitability and eficiency metrics are toward the top of the industry. “And consistent cash low generation. Strong balance sheet. So all of that is attractive to us. It is deinitely a great asset. It’s not really thought about … in a lot of cases when people consider investing in Dillard’s.” Dillard’s also owns most of its stores representing more than $2 billion in prime real estate. The company has been buying back stock since 2011. Analysts generally favor stock buybacks as evidence management thinks the stock is a good value. Analysts also realize share repurchases reduce available shares, increase earnings per share and tend to raise remaining shares’ value. “Dillard’s revenue topped out all the way back in 2000 and has been on a steady decline ever since,” wrote analyst Steve Guenette, “while the company’s earnings have seen a revitalization like never before in recent years.”
BY SONYA COLBERG
World Correspondent
The ideal Dillard’s investor would be someone “who can stomach a little bit of risk,” said Andrew Boyd of Gibraltar Capital Management. MATT BARNARD/Tulsa World ile
Dillard’s Inc. Dollars per share
S O N D J F M A M J J A S 2014 2015
150 140 130 120 110 100 90 80
Dillard’s Inc. Address: 1600 Cantrell Road, Little Rock, AR 72201 Phone: 501-376-5200 Website: dillards.com Chairman and CEO: William T. Dillard II President: Alex Dillard Symbol (Exchange): DDS (NYSE) Operation: A U.S. fashion apparel, cosmetics and home furnishing retailer. Earnings rocketed from a 6 cent loss in 2000 to $2.68 per share in 2010 to $7.79 in 2014. Today’s stock looks cheap at 11 times earnings expected next year versus the industry average of about 20, Boyd said. Investment risks include greater decline in the stock market, retail competition — especially online retailers such as Amazon, inability to react to changing fashion trends, plus any lack of operational eiciency improvement.
Analysts predict the luster will return to black gold company Devon Energy Corp. and ultimately hand shareholders a return on their loyalty. Stock in the natural gas and oil producer should be about $67 per share, according to the average price target projected by 32 brokers recorded on Yahoo Finance. “I think Devon is one of the most attractive stocks in the oil patch to own,” said Longbow Asset Management chief executive Jake Dollarhide. “I think the stock could have a very impressive rise.” Both Devon and oil prices recently hit near their lowest level in six years — about $40 per share and $40 per barrel. The stock market likewise heavily dropped in late August. The market had the worst one-day crash since 2008, a severe slowdown in one of the greatest bull runs in history. “Devon is just one of many oil and gas companies whose stock prices have just gotten obliterated by the sharp fall of oil prices,” said
Devon Energy Corp. Address: 333 W. Sheridan Ave., Oklahoma City, OK 73102 Phone: 405-235-3611 Website: devonenergy.com Chairman: J. Larry Nichols President and CEO: David A. Hager Symbol (Exchange): DVN (NYSE) Operation: Engaged in the exploration, development and production of oil, natural gas and natural gas liquids in the U.S. and Canada.
Devon Energy Corp. Dollars per share
S O N D J F M A M J J A S 2014 2015
80 75 70 65 60 55 50 45 40 35
Dollarhide. Even amid low oil and stagnant natural gas prices, the Oklahoma City-based company has beaten its oil production guidance for the past four quarters. Devon recently reported average daily production rose 9 percent from a year earlier to 674,000 barrels per day, up 18 percent from the previous
quarter. Revenue from oil, natural gas and natural gas liquids sales totaled $1.6 billion in 2014, new Devon chief executive Dave Hager reported. The quarter’s net loss hit $2.8 billion, or negative $6.94 per diluted share. A year earlier, net income reached $675 million, or $1.64 per diluted share. Dollarhide said Devon will be a good investment going forward as oil prices improve. “The energy industry is a risky industry. … It’s so volatile. It’s a boom-bust industry,” said Dollarhide. “During the boom, everyone loves it. During the bust, everyone wants to pull their hair out.”
Tulsa World • September 27, 2015
ONEOK PARTNERS
16
ONEOK unique in energy sector • Ten percent dividends set the irm apart.
Dollars per share
World Correspondent S O N D J F M A M J J A S 2014 2015
CONTINENTAL RESOURCES World Correspondent
60 55 50 45 40 35 30 25
ONEOK Partners LP Address: ONEOK Plaza, 100 W. Fifth St., Tulsa, OK 74103 Phone: 918-588-7000 Website: oneokpartners. com Chairman: John W. Gibson President and CEO: Terry K. Spencer Symbol (Exchange): OKS (NYSE) Operation: Engages in gathering, processing, storing and transporting natural gas in the United States. million. Moody’s quickly downgraded ONEOK Inc. and dropped ONEOK Partners’ “stable” outlook to “negative.” ONEOK Partners’ Baa2 rating remained unchanged. Referring to ONEOK Partners by its trading symbol “OKS,” Moody’s Investors Service wrote: “OKS’s negative outlook relects the negative commodity price pressure that has prompted weakness in OKS’s G&P segment and the potential execution risk assumed in rebuilding EBITDA growth.” Market dynamics will continue to challenge the sector, Dollarhide said. “Right now, people just aren’t buying energy stocks the way they do during a boom cycle,” said Dollarhide. “But there will be a turnaround for the energy industry,” he said. “The energy industry will once again lead this market higher.”
17
Continental Resources stock takes hit BY JACK MONEY
ONEOK Partners LP
BY SONYA COLBERG
Misconception helped drive down shares of ONEOK Partners, according to an analyst, pushing a 50 percent drop from the year’s high. “Wall Street blindly sells anything with the name energy on it,” said Longbow Asset Management CEO Jake Dollarhide. “But it’s such an attractive company.” Dividends yielding 10 percent set the Tulsa-based company apart, said the analyst. “That’s very attractive to income-seeking investors,” said Dollarhide, who ranked ONEOK Partners a top 10 stock. ONEOK Partners gathers, processes, stores and transports natural gas across the U.S. The company posted $2.1 billion revenue in the second quarter, 17 percent better than the quarter before, but 30 percent below the year before. Planned projects totaled about $820 million. The question became: What’s the best way to pay for these projects and everyday operations? The company had about $1.5 billion in credit available. Cash had dropped to $53 million. ONEOK Inc. — the parent company of the sole general partner of ONEOK Partners — came to the rescue. ONEOK Inc. disclosed plans in August to buy about 21.5 million common units at $30.17 per unit from ONEOK Partners. ONEOK Inc. paid with cash and $500 million in senior notes. Also, ONEOK Partners sold another 3.3 million units to an investment irm. This action handed ONEOK Partners about $749
PAGE 15
INVESTMENT GUIDE
If you are looking for a succinct way to understand how the past year has gone for publicly traded oil and gas producers based in Oklahoma, Continental Resources Inc. tells the story as well as any company could. In 2014, the company was the No. 2-ranked company in the Tulsa World’s Investment Guide, with share values in August topping out about $160 a share. Late in the summer, it split its stock 2-for-1, efectively cutting those highs in half. Since then, the company’s stock price largely has followed the equally spectacular fall in the price of crude oil. The value of one of its shares hasn’t been worth even $40 since early July. By the end of 2014, Continental announced it would cut its capital expenditure
Continental Resources, Inc. Dollars per share
S O N D J F M A M J J A S 2014 2015
90 80 70 60 50 40 30 20
plans as oil prices continued to drop. However, the irm hasn’t slowed its production growth. Keith Goddard, CEO of Capital Advisors Inc., told clients in an investor’s note he believes the company will eventually rebound for investors. “Recent data on the global supply and demand for oil suggests the market may be over-supplied by 1.5-2 million barrels per day. This degree of excess supply represents just 1.7 to 2.2 percent of daily consumption.
Continental Resources Inc. Address: 20 N Broadway, Oklahoma City, OK 73102 Phone: 405-234-9000 Website: clr.com Chairman and CEO: Harold Hamm President and COO: Jack H. Stark Symbol (Exchange): CLR (NYSE) Operations: Independent oil and natural gas producer with signiicant holdings in Bakken play. Meanwhile, depletion of existing supplies removes approximately 4 percent of global production each year.” In the note, Goddard wrote, “We believe the stock looks under-valued under most plausible scenarios for the future of oil prices.”
PAGE 16
18 OGE ENERGY CORP.
Tulsa World • September 27, 2015
INVESTMENT GUIDE
OGE Energy Corp. still paying dividends BY JACK MONEY
World Correspondent
OGE Energy Corp.
Like many of Oklahoma’s publicly traded companies, OGE Energy Corp. has seen its stock values take a hit during the past year. But the irm’s reputation of being a reliable, sound investment hasn’t been hurt, as its shares have managed to retain about 75 percent of their value year-over-year. It has continued to pay dividends to investors willing to hold its stock and upped that amount by 2.5 cents per share after the second quarter of this year compared to the same time a year ago. The company says its net income for the second quarter of 2015 came in about $88 million, compared to $101 million in the second quarter of 2014. Earnings during the period were afected
Company Address: 321 N
Harvey, Oklahoma City, OK 73101 Phone: 405-553-3000 Website: oge.com Chairman: Peter B. Delaney CEO and President: R. Sean Trauschke Operations: Operates as an energy and energy services provider that ofers delivery and related services for electricity and natural gas primarily in the south central United States. OG&E is building a utility-scale solar test project in far west Oklahoma City. The Oklahoman ile
by milder-than-expected weather and lower prices for natural gas and natural gas liquids handled by its midstream segment.
Despite those returns, the company still projects it will earn between $1.76 and $1.89 per share this year. Bruce DeShazo, inancial
adviser and vice president of American Heritage Investments at American Heritage Bank, said he believes the stock is a good pick because the company has scheduled dividend increases of 10 per-
OGE Energy Corp. Dollars per share
38 36 34 32 30 28
S O N D J F M A M J J A S 2014 2015
26
cent per year through 2019. “To me, that’s a big deal. They are paying a decent dividend, more than 3 percent,” DeShazo said. “The other thing is they project their earnings to continue to grow during each of the next three to four years.” DeShazo said he also is encouraged by recent company statements noting it expects it will be compensated for emissions upgrades it is making to comply with federal clean air requirements.
19 CHESAPEAKE ENERGY
Amid industry turmoil, Chesapeake moves forward With its new management, Chesapeake Energy has made progress toward simplifying its business model and repairing its balance sheet, one analyst says. Courtesy
BY JACK MONEY
World Correspondent
The investment appeal for stocks in Chesapeake Energy Corp. largely has followed sentiment the markets have shown for oil-and-gas-related investments overall during the past year. A year ago, the value of a Chesapeake share was about $26.80. By Aug. 28, it was trading at $7.69 a share. Like other major independents in the Lower 48, Chesapeake cut its expenditure plans for 2015. At the same time, it also has continued to deal with the fallout left behind by Aubrey McClendon, the company’s founder, after he was forced out by investors in early 2013. In July, the company an-
nounced it would suspend dividend payments to its shareholders as it continued to deal with weak commodity prices. Still, the company has managed to keep growing its production, year-overyear, and expects to be producing an average of 660,000 barrels of oil equivalent per day by the end of 2015.
Analysts like Chesapeake’s eforts to rebalance its operations. “Chesapeake has a controversial history due to the aggressive approach of previous management,” according to Keith Goddard, CEO of Capital Advisors Inc., in a note to investors in August. “Since new management
Chesapeake Energy Corp.
Chesapeake Energy Corp. Dollars per share
25
Address: 6100 N. Western,
Oklahoma City, OK 73118 Phone: 405-848-8000 Website: chk.com Chairman: Archie Dunham President and CEO: Doug Lawler Symbol (Exchange): CHK (NYSE) Operations: Produces oil and natural gas by acquiring, exploring and developing underground reservoirs.
took over in 2013, the company has made tremendous progress toward simplifying its business model and repairing its over-leveraged balance sheet. There is much
30
20 15 10
S O N D J F M A M J J A S 2014 2015
5
work left to be done, particularly as it relates to the balance sheet,” he wrote. “However, we feel conident the stock is worth much more than its recent price under a broad range of assumptions for future oil and gas prices, and we do not expect the balance sheet to get in the way of achieving a higher value eventually,” Goddard wrote.
Tulsa World • September 27, 2015
PAGE 17
INVESTMENT GUIDE
20
WPX ENERGY (TIE)
WPX Energy’s acquisition focus pays of BY JACK MONEY
World Correspondent
WPX Energy Inc.
WPX Energy Inc. remains on the move. After simplifying its portfolio when it spun of from Williams Cos. at the end of 2011, it announced in October 2014 it was doing it again by focusing its development eforts on the Williston, San Juan and Piceance Basins in North Dakota, New Mexico and Colorado. “We’re conident we have the right building blocks” by concentrating on those ields, WPX President and CEO Rick Muncrief said at the time. “We have upside in all three. Our strategy accelerates our oil development and capitalizes on what we can gain from technical excellence, new technology and greater economies of scale.” Earlier this summer, WPX announced a $2.75 billion
Address: 3500 One Williams Center, Tulsa, OK 74172 Phone: 855-979-2012 Website: wpxenergy.com President and CEO: Richard E. Muncrief Symbol (Exhange): WPX (NYSE) Operations: Focuses on natural gas reserves and related natural gas liquids in the Rocky Mountains, North Dakota, and the San Juan Basin and the Permian Basin in the southwestern United States.
WPX Energy is focusing operations in New Mexico’s San Juan Basin, as well as ields in North Dakota and Colorado. Courtesy
deal to acquire RKI Exploration & Production and its liquids-rich holdings in the Permian Basin ield. In November, WPX reported a boost in its domestic crude production in the third quarter of the year by 52 percent, year-over-year. In early 2015, it said it had increased
its annual year-over-year production of domestic crude 56 percent — a better achievement than it had anticipated. In the second quarter of 2015, the company announced a net loss of $30 million, primarily due to the drop in commodity prices. WPX’s moves excite invest-
ment analysts, despite the oil and gas sector’s diiculties during the past year. “They’ve certainly turned things around by becoming the acquirer, rather than the target,” said analyst Jake Dol-
WPX Energy, Inc. Dollars per share
30 25 20 15 10
S O N D J F M A M J J A S 2014 2015
5
larhide, CEO of Longbow Asset Management. “They went out and bought a company at a time when most of their peers are running of people, selling assets or staving of bankruptcy.” Dollarhide acknowledges WPX’s stock value has been hammered like the stocks for many of its peers, saying “there’s no hiding from that.” “But they’ve sent a very clear message to investors that they are here to stay. I think this is one of the companies that will survive.”
20
MATRIX SERVICE (TIE)
Matrix Service Co. ends FY 2015 on a high note BY JACK MONEY
World Correspondent
Matrix Service Co. celebrated the start of construction on a third site it would operate on at the Port of Catoosa in September 2014. It broke ground on that project just weeks after announcing the company had reached a new high in revenues for its 2014 iscal year. Matrix reported revenue of $1.263 billion for the iscal year, an increase of 41.5 percent over 2013. The company predicted then it expected revenues to be at least $1.4 billion in iscal 2015, counting in part on additional work that would come from its August 2014 acquisition of upstream oil
Matrix Service Company Dollars per share
S O N D J F M A M J J A S 2014 2015
30 28 26 24 22 20 18 16
Matrix Service Co. Address: 5100 E. Skelly Drive, Suite 700, Tulsa, OK 74135 Phone: 918-838-8822 Website: matrixservicecompany.com President and CEO: John R. Hewitt
Symbol (Exchange): MTRX (Nasdaq)
Operations: Provides engineering, infrastructure and maintenance to the oil, gas, power, petrochemical, industrial and mining and minerals markets.
Construction crews work at
and gas construction contractor HDB Ltd. After three quarters of disappointing earnings, the company announced it had experienced a good fourth quarter, with net income of $10.9 million, compared to $7.6 million a year earlier. Revenue for the year ending June 30 was $1.35 billion, lower than what the company had
estimated, but not badly so. This summer, President and CEO John R. Hewitt offered an upbeat appraisal of his business’ future as part of the company’s annual earnings release, ofering investors the same message he had been sending all year. “As we close the books on iscal 2015, our business is strong, and I am conident in
our iscal 2016 guidance,” he the site of a new Matrix facility at the Port of Catoosa last year. said. Jake Dollarhide, CEO of JOHN CLANTON/Tulsa World ile Longbow Asset Management, said Matrix’s share val- Matrix also provides building ue has held up relatively well and maintenance services for, the past year because of the continues to sufer through a diversity of its clients. bear market. While the oil and gas secBut still, Dollarhide said, tor hasn’t had a good year, “they have a number of pipeDollarhide also points out lines to customers that help the mining industry, which them weather the storm.”
PAGE 18
BIG 5
NATIONAL PICKS JP Morgan Chase & Co.
BY COLLEEN ALMEIDA SMITH World Business Editor
80
Dollars per share
No. 1: JPMorgan Chase & Co.
70
Overview: JPMorgan Chase (JPM) provides inancial services worldwide through four segments: consumer and community banking, corporate and investment banking, commercial banking and asset management. CEO: James “Jamie” Dimon Employees: 237,000
60
KEY STATS (as of Sept. 11) Market cap: 230.55B 52-week high: 70.61 (July 23) 52-week low: 50.07 (Aug. 24) Next earnings date: Oct. 13 ANALYST’S INSIGHT
“JPMorgan is one of the leading global inancial irms in the U.S. with over $2.6 trillion in assets. JPM is presently focused on an expense savings target of $4.8 billion by 2017, a goal which the
Honeywell International Inc.
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company is well ahead of pace on achieving according to the most recent earnings call. JPM has continued to see strong core loan growth of 12 percent year over year during the most recent quarter, ahead of the company’s targeted growth rate of 10 percent. JPM should be well positioned to beneit from higher interest rates over the next year as net interest margins expand from the anticipated fed funds tightening.” — JIM HUNTZINGER, BOK Financial Corp.
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Chevron Corp. 20
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JPMorgan Chase & Co. leads our national stock picks. MARK LENNIHAN/AP ile
Bank of America Corp.
American Airlines Group Inc. 110
Dollars per share
10 2011
Tulsa World • September 27, 2015
INVESTMENT GUIDE
6
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No. 2: Honeywell International
No. 3: American Airlines Group
No. 4: Bank of America
No. 5: Chevron Corp.
Overview: Honeywell (HON) operates as
Overview: American Airlines Group (AAL)
Overview: Bank of America (BAC)
Overview: Chevron (CVX) has petroleum, chemicals, and power and energy operations worldwide in both upstream and downstream segments of the industry. CEO: John S. Watson Employees: 64,700
a diversiied technology and manufacturing company worldwide with segments in aerospace, automation and control solutions, and performance materials and technologies. CEO: David M. Cote Employees: 127,000
KEY STATS (as of Sept. 11) Market cap: 77.67B 52-week high: 107.41 (Aug. 10) 52-week low: 82.89 (Oct. 15) Next earnings date: Oct. 15-19 (est.) ANALYST’S INSIGHT
“Honeywell has crafted a strong competitive advantage in its aerospace business and beneits from high switching costs in the industry. Honeywell ofers investors a strong balance sheet with $7 billion in cash, a dividend that has risen 10 times since 2005, and a commitment to buy back shares. The management continues to actively look for acquisition candidates, which can utilize Honeywell’s global distribution and sales networks it has built over decades of selling thermostats and alarm systems. The company promised to do $10 billion in deals through the end of 2018.” — QIAN ZHANG, Fredric E Russell Investment Management Co.
lies mainline jets and regional aircraft to more than 330 destinations in 54 countries. It also has one of the largest maintenance bases in the world at the Tulsa International Airport. CEO: William Douglas Parker Employees: 120,400
KEY STATS (as of Sept. 11) Market cap: 28.06B 52-week high: 56.20 (Jan. 26) 52-week low: 28.10 (Oct. 13) Next earnings date: Oct. 21-26 (est.) ANALYST’S INSIGHT
“All airlines have beneited from the plummeting price of fuel, but none more than American Airlines. AAL’s policy to not hedge fuel costs have allowed the company to realize massive savings. Management has been using the extra cash low to pay down high-interest debt and to repurchase shares of stock at very attractive prices. The stock carries an extremely cheap valuation with a P/E ratio of less than 5, which provides a nice entry point for investors looking to buy shares. In an environment where oil prices remain depressed, the economy continues to strengthen and people travel more frequently, American Airlines is well positioned to reap the beneits.” — ANDREW BOYD, Gibralter Capital Management
ofers consumer and business banking; real estate services; wealth and investment management; and global banking and markets. CEO: Brian T. Moynihan Employees: 216,700
KEY STATS (as of Sept. 11) Market cap: 166.23B 52-week high: 18.48 (July 22) 52-week low: 14.60 (Aug. 24) Next earnings date: Oct. 14 ANALYST’S INSIGHT
“In the irst half of 2015, Bank of America saw investment banking revenues rise, and no additional legal or regulatory expenses were announced. With a high probability of rising interest rates in the near-term, it is projected that their net interest margin will rise along with overall proitability. And if the stock market continues its run, then its Merrill Lynch unit will continue to shine.” — JAKE DOLLARHIDE, Longbow Asset Management Co.
KEY STATS (as of Sept. 11) Market cap: 141.81B 52-week high: 125.70 (Sept. 19, 2014) 52-week low: 69.58 (Aug. 24) Next earnings date: Oct. 29-Nov. 2 (est.)
ANALYST’S INSIGHT
“Chevron currently has $13 billion in cash on hand, they generate $30 billion in cash low from operations and they have minimal debt, which should allow them to leverage up their balance sheet for attractive investments in the future. The company is attractively priced and is trading at 11 times historical earnings. Chevron has signiicant exposure to oil relative to other large integrated energy companies — currently two-thirds of Chevron’s production is liquids and onethird is natural gas. If oil prices continue to improve, Chevron should be well positioned to outperform the energy sector over the next several years.” — JAMES F. ARENS II, Trust Company of Oklahoma
Tulsa World • September 27, 2015
INVESTMENT GUIDE
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INVESTMENT GUIDE
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Tulsa World • September 27, 2015