Global energy production is booming, and one of the best ways to profit without being hurt by commodity-price volatility is to invest in the companies servicing and supplying the oil and gas industry.
Consider National Oilwell Varco (NYSE: NOV), the world leader in providing major mechanical equipment for land-based and offshore drilling rigs. The company has more than 800 manufacturing, sales and service centers, and about 90 percent of all rigs carry some of its equipment.
National Oilwell Varco’s first-quarter 2014 results featured its backlog of orders for rig technology equipment hitting an all-time high of $16.4 billion (up 27 percent year-over-year), revenue rising 9 percent and net income jumping 18 percent.
The company isn’t perfect, as it does face risks such as competition, and its profit margins have been shrinking a bit in recent years. It expects a modest near-term slowdown, too. Still, National Oilwell Varco can benefit enormously from an anticipated spending spree worth hundreds of billions of dollars in new energy production infrastructure investment. It also plans to standardize its equipment and infrastructure, which will help customers keep costs down without sacrificing timeliness when replacing parts.
National Oilwell Varco stock is fairly inexpensive, recently with a price-to-earnings (P/E) ratio near 14 and a dividend yield close to 2.4 percent. (The Motley Fool owns and has recommended shares of the company.)
Q: How do I invest in socially responsible companies? – B.K., Canton, Ohio
A: First, understand that the term can mean different things. A company may have many women in management and not produce firearms, but it might pollute the environment. It’s hard to find completely objection-free organizations.
Still, you do have several options for socially responsible investing (SRI). You might, for example, invest in a socially responsible mutual fund. As with most funds, not all SRI funds have above-average records. Still, some do, such as the Neuberger Berman Socially Responsive Fund (NBSRX), the Ariel Appreciation Fund (CAAPX) and the Parnassus Core Equity Fund (PRBLX).
Learn more about SRI investing and issues at ussif.org, socialfunds.com, csrwire.com and corpwatch.org. You can also visit the websites of firms that run responsible funds, such as calvert.com, domini.com and paxworld.com.
Alternatively, seek out companies whose practices you approve of. You can research various companies’ social track records at socialfunds.com/csr. Check out these books, too: “Socially Responsible Investing for Dummies” by Ann Logue (For Dummies, $25) and “Investing for Change: Profit From Responsible Investment” by Augustin Landier and Vinay B. Nair (Oxford, $28).
Q: How can I give small gifts of stock to my grandchildren? – T.B., Palm Beach, Florida
A: First, focus on companies they know and like, such as Apple or Nike. (The Motley Fool owns and has recommended both.) Next, consider opening direct investment plan accounts. Often called “Drips” or DSPs, they let you bypass brokers when buying stock. Learn more at fool.com/school/drips.htm, dripinvestor.com and directinvesting.com. There are also some companies specializing in gifts of stock, such as oneshare.com, uniquestockgift.com and giveashare.com. They’re not cheap, though, charging a purchase fee of $15 to $40 or so.
My dumbest investment
My family vacationed in Maine in 1987. With some savings burning a hole in my pocket, I purchased a waterfront duplex there as an investment. Living in Washington, D.C., though, it soon became apparent that we weren’t going to spend much time in Maine, and rent payments didn’t come close to paying the mortgage. The purchase was at the height of the market, and when I decided to sell several years later, the market had gone way down. Despite the loss, though, there were still funds left over. I used them to start investing in stocks, a far superior investing activity! – J.P., Washington, D.C.
The Fool responds: You’re illustrating some warnings we’ve issued over the years – that it’s best not to think of your home as an investment, and that owning rental properties is not as easy as it may appear. There are good reasons to buy properties, but keep in mind that they can lose value over time and be hard to sell. Stocks carry risks, too, but over the long run, they’ve outperformed most other investment alternatives, such as real estate, gold and bonds.
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